Journal of Strategy and Management

Philip Bromiley; Mark Washburn

2011 Journal of Strategy and Management

doi: 10.1108/17554251111152243

Purpose – This study aims to compare alternative search behaviors managers enact with regard to firm aspirations. Design/methodology/approach – The behavioral theory of the firm predicts that poor performance relative to aspiration levels leads to search for ways to raise performance over aspirations. Most researchers have assumed search leads to risk‐taking or innovation. However, firms might search for ways to raise performance without incurring additional risk, such as reducing expenses. This paper compares the two models of search using data on research and development (R&D) spending. Findings – The results generally support the cost cutting argument; R&D spending increases monotonically with performance relative to social aspirations. Research limitations/implications – These results suggest researchers need to consider searches that emphasize cost reduction, as well as searches that emphasize innovation. Originality/value – Overall, this paper extends behavioral work on risk‐taking and R&D to provide a more complex view of the interactions between kinds of aspiration levels and both innovation and search behavior.

Thomas Lawton; Tazeeb Rajwani; Conor O'Kane

2011 Journal of Strategy and Management

doi: 10.1108/17554251111152252

Purpose – This paper aims to illustrate how legacy airlines can reorientate to achieve sharp recoveries in performance following prolonged periods of stagnation, decline and eroding competitiveness. Design/methodology/approach – The authors use a qualitative analysis of five longitudinal case studies of legacy airlines that embarked on strategic change between 1997 and 2006. Data collection spanned ten years and included archival data, public documents, news clippings, accounts in specialist books and internal company documentation. Findings – The paper identifies two distinct approaches for reorientation in the legacy airline industry. Companies that have fallen behind and are in risk of failure focus on regaining customer trust and loyalty, and restructuring route networks, business processes and costs in an “improvement and innovation” reorienting approach. Underperforming airlines, for whom growth has declined in traditional markets and who note that opportunities exist elsewhere, focus on product and service development and geographical growth in an “extension and expansion” reorienting approach. Practical implications – The paper develops a framework for successful reorientation in the legacy airline industry. This framework encourages executives to focus on and leverage profit maximization, quality, leadership, alliance networks, regional consolidation and staff development during periods of strategy formulation and reorientation. Originality/value – This research addresses the dearth of understanding and attention afforded to the concept of reorientation in the literature on strategic turnaround. The research also serves to emphasize the presence and importance of reorientation as a strategy of change within the legacy airline industry. Furthermore, in demonstrating how this strategy can be implemented in a sharp‐bending or performance improvement context, this study illustrates how reorientation is intertwined with the broader turnaround process.

Gail Steptoe‐Warren; Douglas Howat; Ian Hume

2011 Journal of Strategy and Management

doi: 10.1108/17554251111152261

Purpose – The paper seeks to examine both management and psychological literature on strategic decision making. Design/methodology/approach – A review of the management and psychological literature is undertaken, with particular focus on factors affecting strategic decision making. Findings – The literature review reveals that managerial cognition as well as individual and corporate values can have an impact on strategic decision making. The review also finds that strategic competencies are important although there is no agreement within the literature on what those competencies are. Originality/value – Strategic thinking and strategic decision making have been discussed within the psychological and management literature for decades. Psychological and management theoretical perspectives and empirical research have been discussed separately and failed to consider both together. The current paper reviews both psychological and management literature to provide an understanding of the strategic thinking and decision making process and factors that may affect the process.

Daniel Degravel

2011 Journal of Strategy and Management

doi: 10.1108/17554251111152270

Purpose – This paper seeks to contribute to the RBV by focusing on a central construct, the “Keystone step”, within the firms' capability management field. It aims at providing a conceptual framework for top managers to understand the main related issues and steps, and to position their own organizational perspective. Design/methodology/approach – The study explores the associated conceptual and empirical literature, borrowing from a strategic and a cognitive perspective, and defines and characterizes the central construct. Findings – The author identifies a three‐step managerial process to handle capabilities: the Analytical step, the Action step, and the Keystone step. After briefly reviewing the resource‐based view, he suggests definitions and critical dimensions to design a conceptual frame articulated around the Keystone step, within which top managers can position and build their own approach. The critical founding rationale of capability management, rooted in underlying assumptions and beliefs, often implicit, hidden or neglected, increases the odds of blind managerial conceptual foundations. The author's claim focuses on the criticality of the Keystone step and the necessity of introspection to achieve sound strategic and capabilities‐related decisions. Implications – Managers must recognize the importance of the Keystone step, devote resources to understand their own organizational “RBV position”, and acknowledge the mental flexibility to do so. The RBV should shift from an epistemology of “possession” to an epistemology of “embodiment”. Originality/value – The paper offers an original vision of the capabilities management within the RBV, details out the issues of the current conceptual foundation of that managerial activity, and offers propositions for the Keystone step construct.

Ren Lu; Torger Reve

2011 Journal of Strategy and Management

doi: 10.1108/17554251111152289

Purpose – Understanding China's economic success requires insights into its peculiar guanxi ‐based market. Many scholars are confused about how to apply Western network theories to the guanxi ‐based Chinese market. This paper aims to contribute to this comprehensive topic by theoretically exploring the differences among three fundamental network concepts: guanxi ; structural hole; and closure. Design/methodology/approach – Following Heide, the present paper categorises networks into three dimensions: network initiation, network maintenance and network termination, each based on different time phases. The three fundamental network concepts in every dimension are compared, laying out their similarities and dissimilarities in detail. Findings – Although each of the three networks are initiated either naturally or artificially, guanxi is closely embedded in Chinese institutions. Unlike structural hole and closure, which can be applied at any level, guanxi is a special relation that only exists at the individual level. Structural hole and closure highlight the structures of the networks that bring them various benefits and constraints. Such merits are not evident in guanxi , in which favour exchange plays a crucial role in connecting entities. In addition, guanxi has special rules that affect the strength of ties. Originality/value – The purpose of this paper is to articulate the differences among guanxi , structural hole and closure. The systematic framework provides a platform to scholars interested in applying the Western network theory to guanxi ‐based markets. The study work also provides new insights to non‐Chinese actors doing business in China.

Abby Ghobadian; Nicholas O'Regan

2011 Journal of Strategy and Management

doi: 10.1108/17554251111152298

Purpose – Mergers and acquisitions are among the most intensely used strategic decisions. Yet research by both academics and consulting groups suggests that many mergers and acquisitions fail to add value. On the other hand there are many companies that successfully use mergers and acquisition to grow and add shareholder value. One such company is WPP. The aim of this paper is to explore why WPP has been successful in its acquisition strategy while so many other companies fail. Design/methodology/approach – The paper draws on documentary evidence and a semi‐structured interview with Sir Martin Sorrell – Chief Executive and founder of WPP. Research limitations/implications – The case study offers a unique insight into thinking of a successful acquirer and sheds light on how mergers and acquisitions are managed by WPP. However, because of its design the findings are not generalisable. Originality/value – This case study sheds light on how mergers and acquisitions can be used to create a £9 billion company from a standing start. Furthermore, very few case studies offer insight into the thinking of entrepreneurial Chief Executives who established the business, grew it to become the largest and most profitable marketing services company in the world and engineered close to 300 acquisitions.