Academic journal article Journal of Emerging Trends in Economics and Management Sciences

The Influence of External Stakeholders and Expansion Strategies on the Relationship between Organisational Resources and Firm Performance

Academic journal article Journal of Emerging Trends in Economics and Management Sciences

The Influence of External Stakeholders and Expansion Strategies on the Relationship between Organisational Resources and Firm Performance

Article excerpt

Abstract

For decades, the field of strategic management has focused on the determination of drivers of performance and the causes of variation in performance within and between firms. The frameworks so far identified such as resources, external stakeholders and expansion strategies provide partial explanations to performance. This paper seeks to investigate the drivers and causes of variation in performance from a resource based perspective while considering the joint influence of external stakeholders and expansion strategies. According to the resource based theory, resources are central to a host of organisational actions and outcomes. Resources determine a firm's response capabilities and response strategies, growth and expansion strategies and can ultimately be leveraged to secure superior performance. Stakeholder theorists have argued that paying attention to and satisfying stakeholder needs is essential to organisational success. However, the influence of stakeholders on firm performance has seldom been articulated. The effect of expansion strategies such as diversification and internationalization on performance has been investigated. The literature review done and the conceptual model developed establish the moderating effect of external stakeholders and the intervening role of expansion strategies on the relationship between resources and performance. The findings will provide useful insights to managers on factors affecting performance and the manner in which they affect performance. This will help refocus strategic effort towards improved performance of the institutions and contribute to the steadily growing knowledge on the drivers of firm performance and causes of variation in firm performance and could possibly guide future research.

Keywords: resource based view, strategy, performance, competency, capability, stakeholder(s), growth, expansion.

INTRODUCTION

Strong forces of change such as globalization, advances in information technology and hyper- competition are reshaping the competitive landscape worldwide, steering organisations to identifying and managing factors and processes critical to their survival and success. Companies are not only undergoing rapid and radical change, but are also experiencing a fundamental shift in the rules of competition and the way the game of competition is played (Ilinitich et al., 1996).The competitive advantage (CA) of firms is seen as resting on distinctive processes, shaped by the firm's specific asset positions and the evolution paths it has adopted or inherited (Teece et al., 1997). Recent studies have focused on the importance of strategy and environmental fit on firm performance (Kratzer et al., 2008). Further efforts have focused on how stakeholders affect strategy (Freeman et al., 2004; Ferrell, 2004); environment and stakeholder commitment (Henrique and Sadorsky, 1999); resources, capabilities, competencies and expansion (Wernerfelt, 1984; Marino, 1996; Mishina et al., 2004) and finally firm performance (March and Sutton, 1997). These studies have come short of investigating the moderating effect of external stakeholders and the intervening effect of expansion strategies. Convergence is yet to occur on the conceptual underpinnings and definitions of core competencies and strategic capabilities. For organisations to respond effectively to the challenges inherent in the environment, they need sufficient resources (Pfeffer &Salancik, 1978). Large firms are associated with economies of scale and scope, ease of access to credit financing, brand visibility and allegiance, significant resources to foster research and development, valuable patents and competences. Growth is often viewed as an important organizational outcome, and firms have a number of motivations to expand (Penrose, 1959). Organisational growth and expansion can be seen as strategic response options. The resource dependence theory proposes that the key to organisational survival is to acquire and maintain resources (Pfeffer and Salancik, 1978) and that firm behaviors are resource-driven (Barney, 1991; Dierickx and Cool, 1989). …

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