Do strategic groups exist? An economic framework for analysis

David Dranove, Margaret Peteraf, Mark Shanley*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

120 Scopus citations

Abstract

This paper offers a framework and methodology for resolving the question regarding the existence of strategic groups. We say that a strategic group exists if characteristics of the group affect firm performance independently of firm-level and industry-level effects. We argue that group-level effects are a byproduct of strategic interactions among members, and develop an empirical testing model, based on the 'New Economics of Industrial Organization,' to distinguish true group effects from spurious effects. From this model, we derive a series of logically consistent propositions, suggesting that while strategic interactions are critical for a group-level effect on profits, mobility barriers are necessary to preserve both groups and their effects over time. A review of prior empirical studies of strategic groups suggests that the inconclusive nature of prior research has been due more to the lack of a theoretical foundation for empirical analysis than to the nonexistence of groups. To the extent that our methods have been employed, there is limited evidence that a rigorous search for strategic groups may prove fruitful.

Original languageEnglish (US)
Pages (from-to)1029-1044
Number of pages16
JournalStrategic Management Journal
Volume19
Issue number11
DOIs
StatePublished - Nov 1998

Keywords

  • Economics
  • Industry analysis
  • Performance
  • Strategic groups
  • Strategic interactions

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

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