Competitive strategy, structure and firm performance

Abstract

PurposeDecisions about the design of the organization and the competitive strategy of a firm are very important in order to gain competitive advantage and to improve firm performance. The relationship between organizational structure, competitive strategy, and firm performance has usually been analyzed using the contingency approach. The objective of this paper is to extend the relevant empirical literature of the strategy‐structure‐performance paradigm by comparing the resource‐based view (RBV) with contingency theory. To that end, the paper seeks to examine how organizational structure affects firm performance, taking into account the relationship with competitive strategy.Design/methodology/approachA sample of large Spanish firms was studied using the partial least squares (PLS) technique.FindingsThe results support both the RBV and the contingency approach, but the RBV is more strongly supported. The findings show that organizational structure does not exert a direct influence on performance, but has an indirect influence through competitive strategy.Research limitations/implicationsThe findings are limited to large firms. Therefore, they cannot be generalized to smaller companies. In addition, the use of opinion scales gives the study a subjective character. However, in this respect, most of the characteristics of organizational structure and competitive strategy are difficult to measure with objective data.Originality/valueResearchers have studied the relationship between strategy and structure for a long time based on contingency theory. This study provides an alternative formulation for organizational design theory, based on the RBV, which makes it possible to reframe the relationships between strategy and structure by analyzing the organizational structure as a valuable resource and a source of competitive advantage.