Abstract

Does strategic group membership affect firm performance? Strategic management scholars have long shown keen interest in elucidating this question. Yet, after three decades of theoretical and empirical investigation, little agreement has been reached over the research findings. Extant research examining the relationship between strategic group membership and firm-level performance has produced mixed and sometimes contradictory findings. Results vary from strong support for such a relationship, to only a small or non-significant association, along with some studies suggesting that the strength of the relationship is sensitive to research methodology. Drawing from multi-point competition, structural embeddedness and social network literature, this longitudinal study attempts to address the inconsistency of these findings by proposing that the level of within-group multimarket contact, the density of ties maintained among group members, the extent of their role equivalence, and their centrality in the industry's network of strategic alliances moderate the relationship between strategic group membership and firm performance. Four hypotheses based on these arguments were tested using three samples from the pharmaceutical, the airline and the automotive industries. Empirical results provide support for all four hypotheses and suggest that analyzing the performance effects of strategic group membership independently of group members' market and network positions strongly eclipses the complex dynamics underlying persistent performance differences in an industry.