Unintended Effects of Strategic Choice? Competitive Strategy and Charter School Performance

Abstract

This article empirically examines how competition influences an organization’s strategic choice of product-market scope in a nonprofit industry, as well as the relationship between product-market strategies and organizational performance. Using panel data of charter schools in Texas (1997-2007), we find evidence that competition in a particular market segment decreases a focal organization’s likelihood of entering the segment; once having entered the market, an organization’s product scope increases with the number of competitors in the market, albeit at a decreasing rate. Our findings also indicate that an organization’s strategic choice has differing effects on different dimensions of organizational performance: a broader product-market scope hurts an organization’s financial performance, but improves its non-financial (academic) performance. Further, environmental turbulence strengthens the negative impact of scope on financial performance, but it does not affect the positive impact of scope on academic performance.