How do performance gaps shape managerial strategy? The role of sector-differences in U.S. nursing homes

Abstract

Despite the high volume of literature on managerial strategy, few studies have explored how performance gaps shape managerial strategy, particularly across sectors. Emerging studies indicate that different risk preferences, market competition, and financial incentives across sectors play important roles in shaping managerial strategy in response to performance gaps. Using U.S. nursing homes, this study examines how performance gaps shape prospecting and defending strategies, and whether the relationship is contingent on sector. The findings indicate that nursing home managers are more likely to be prospectors when they outperform past performance or other competitors. When considering sector-differences, this finding is consistent in only for-profit nursing homes. Regardless of performance gaps, for-profit nursing homes are also more likely to adopt a defending strategy compared to their nonprofit or public counterparts. The findings suggest that sector-differences should be carefully considered to understand the impact of performance gaps on managerial strategy.