Abstract
This study aims to examine the mediation effects of differentiation strategy and cost leadership strategy on the relationship between industrial competition and the performance of the higher education industry in Timor-Leste. The total of 157 departments of 11 accredited tertiary institutions in Timor-Leste were chosen to fill in the questionnaires, while SMART-PLS 3.0 was used to test the hypothesis. The results of this study show that industrial competition does not significantly influence industrial performance, while both the differentiation and the cost leadership strategies fully mediate the relationship between industrial competition and the performance. This research contributes to the debate on competitive strategic fitness to sustain competitive advantage in regard to pure strategy or combined strategy which is still unsettled among researchers. This research also contributes to developing strategic policies in the higher education industry for improving competitive advantages which lead to superior performance. The higher education industry can also benefit from this research by considering a combined differentiation and cost leadership strategy as a competitive strategy to improve industrial performance.
Highlights
Industrial organizations seek to develop strategic fitness to maintain competitive advantages and outperform their competitors
The result of direct effect of the relations between the industrial competition (IC) and industrial performance (IP) show that the T value is 0.831 and the P value is 0.406 (Figure 2 and Table IV) which means the T value is lower than the maximum limit of 1.96 and the P value is greater than the minimum acceptable value of 0.05 (Hair et al, 2014)
The results show that the relationships between all variables in the model are positive and significant (T values greater than 1.96, and P value less than 0.05), except the relationship between industrial competition (IC) and industrial performance (IP) which is not significant (T value lower than 1.96 and P value greater than 0.05)
Summary
Industrial organizations seek to develop strategic fitness to maintain competitive advantages and outperform their competitors. Strategic contingency theory states that effective strategies should fit the specific features of the environment in which industrial organizations do business (Baack and Boggs, 2008). Well-established business strategies such as the differentiation strategy, cost leadership strategy, organization resource and capability strategy (resource-based theory) become the distinguishing sources of industrial competitive advantage and performance (Porter, 1980; Barney, 1991; Kim et al, 2016). Resource-based theory states that industrial organizations have heterogeneous resources and capabilities, they have different performances. Porter’s competitive strategy involves an industrial organization adopting either differentiation strategy or cost leadership strategy to sustain competitive advantage, leading to superior performance. Industrial organizations cannot adopt both strategies simultaneously, otherwise industrial organization will confront what is called “stuck-in-the middle”, which leads to poor performance (Porter, 1980, 1985; Kaliappen and Hilman, 2017)
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