Academic journal article Journal of Business Strategies

The Competitive Cohort: An Extension of Strategic Understanding

Academic journal article Journal of Business Strategies

The Competitive Cohort: An Extension of Strategic Understanding

Article excerpt

Abstract

The use of referent others to establish the concept of competitive cohorts is presented as a way to extend the understanding of strategic decision making in organizations. The competitive cohort concept does not replace other perspectives of the firm, industry or strategic group definitions, strategy formulation, or decision making, but rather, helps in understanding how organizational goals are established and performance is shaped and measured. The use of the competitive cohort concept may also give a new coherency in and view of the concepts of competitive advantage and sustained competitive advantage.

Introduction

A fundamental concern of research in the strategic management and entrepreneurship literatures is to provide explanations for strategic managerial decision making and firm performance. That concern has prompted examination and instruction of both external and internal factors that have the potential to influence strategy formulation, implementation, and resultant performance. For example, Hitt, Ireland, and Hoskisson's (2011) widely used textbook for strategic management categorizes inputs into the strategic management decision making process as either belonging to the external or the internal environments of the organization. The textbook uses the industrial-organizational (I/O) perspective to address the external factors decision makers must consider and the resource-based view (RBV) of the firm to address internal factors facing decision makers. Though not specifically directed toward antecedents of firm performance, traditional I/O economics as a field includes a focus on effects that industries have upon firm performance (Nair & Kotha, 2001; Thomas & Pollock, 1999). That focus has not resulted in a complete understanding of firm performance, though it has provided some useful insights regarding external influences upon performance.

In contrast, the RBV and its internal perspective of the firm have been elaborated upon in a variety of ways that attempt to explain performance based on the heterogeneity of the resources and capabilities within organizational boundaries (Barney, 2001; Barney, Wright, & Ketchen, 2001; Oliver, 1997). The RBV has turned the search for antecedents of performance toward the internal factors that influence firm performance, but it does not answer important questions about the external influences that are exerted upon performance. In this light, then, an important question arises when considering the two separate domains of external and internal factors that influence decision making inside firms: How do decision makers link the two domains within a management process and develop performance goals? The concept of a competitive cohort, introduced below, is proffered as a way to help answer that question because it seeks to address the motivations of decision makers as they process information and formulate organizational strategy within the intersection of external and internal domains.

Additionally, organizational boundaries are changing in ways that may blur the traditional categorizations of internal and external influences upon performance and complicate decision making about adopting performance goals and measures. Some of those changes result in organizations operating in nontraditional ways and with fewer people (Conner, 2003; Markus, Manville, & Agres, 2000). Not only are the boundaries changing, but so too are the ways in which comparisons across firms are made. SIC (Standard Industrial Classification) or NAICS (North American Industry Classification System) codes were the traditional way in which organizations were classified as a way to understand groups of organizations and their operations. The North American Industry Classification System (NAICS) has replaced the U.S. Standard Industrial Classification (SIC) system. Developed jointly by the U.S., Canada, and Mexico, NAICS provides new comparability in statistics about business activity across North America. …

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