Using hierarchical linear modeling to test the effect of overall strategic fit on firm performance in different industry

Abstract

PurposeThis study aims at investigating the effect of an overall fit among strategy, environmental factors and organizational resources on firm performance, and the moderating role of industry on this relationship.Design/methodology/approachThis paper uses hierarchical linear modeling to analyze the nested data structure from the financial and electronics companies in Taiwan’s stock market from 2011 to 2012.FindingsThe empirical results indicate that overall strategic fit is positively related to firm performance, and this relationship varies across financial industry and electronics industry.Originality/valueThis study provides important implications for both academic researchers and practitioners. From a theoretical aspect, this study integrates two research streams of strategic fit (external fit and internal fit) into an overall model of strategic fit, and has explored the moderating role of industry on the relationship between strategic fit and firm performance. In addition, this study has also used hierarchical linear modeling method to test the hypotheses, which has not been used in the previous strategic fit literature. From a practical aspect, the empirical results have derived implications for managers as to understand the effects of overall strategic fit on performance in different industry, which may be helpful for making decisions in specific industry context.