Strategic Heterogeneity and Firm Performance: A Coevolutionary View
35 Pages Posted: 2 Feb 2007
Date Written: January 2007
This paper suggests a coevolutionary analysis of the relationship between heterogeneity and firm performance advocating a more dynamic view of the development of strategic heterogeneity. Drawing on previous enquiries in behavioral and evolutionary economics of heterogeneity and performance, it proposes a conceptual framework that explains how the coevolution of strategic heterogeneity and firm performance occurs over time. Moving from some basic definitional and measurement problems of heterogeneity, we argue that heterogeneity and performance coevolve with each other through strategic (temporal and spatial) interrelatedness, circular causality and feedforward processes. Looking beyond the static vision proposed by early studies in the resource-based view of heterogeneity, the study detects two main levels of heterogeneity sources within firms and between firms: (a) the first heterogeneity level heeds to the persistence of differences in strategic behavior and performance among competitors within an industry; (b) the second heterogeneity level applies to strategic diversity within the same firm and, more precisely, to the in-house variations (i.e., resource and capability endowments and/or structural forms and profiling) that a specific firm displays between a given time t0 and the subsequent time t1. We characterize and advance taxonomy of eighteen situations that may epitomize the causal relationships between heterogeneity and performance and eventually draw a few theoretical fallouts for prospective research in strategy.
Keywords: Strategic heterogeneity, firm performance, coevolutionary view, behavioral theory, evolutionary theory
JEL Classification: L11, L20, L21, M20, M21
Suggested Citation: Suggested Citation