Strategy, Environment and Performance in Two Technological Contexts: Contingency Theory in Korea

Abstract

This paper examines the range of application of strategic contingency theory. Its thesis is that as technologies and economies become more open to market forces, the tenets of contingency theory become increasingly relevant. The Korean economy seemed an ideal venue for testing this notion as it is very heterogeneous in the effectiveness of its technological regulation. Many Korean companies employing traditional technologies are able to benefit from government intervention, whereas most of those using emergent technolo gies — even in the same industry — are forced to compete internationally and are very much more subject to competitive market forces. We found that Korean companies using emergent technologies were more likely to do well if they heeded contingency prescriptions in making strategy: specifically, if they employed innovative and marketing differentiation strategies in uncertain environments and cost leadership strategies in stable contexts. On the other hand, companies that used traditional technologies were less apt to benefit from matching strategy to environment. In short, strategic contingency literature was found to apply more to businesses employing emergent technologies than to those using traditional technologies. Notions from institutional and contin gency theory and from the literature on cross-cultural management are used to interpret these findings.