Abstract

The relationship between strategic group membership and firm profitability has been a central and controversial theme in the strategic management literature. The theoretical foundation for a direct link between strategic group membership and firm profitability has been the notion of mobility barriers. However, the empirical evidence for a direct association between strategic group membership and performance is inconsistent and conflicting. Consequently, this study examines the hypothesis that individual firm sustainable growth capabilities may moderate the effects of member's shared strategy characteristics on performance in the pharmaceutical industry. Four strategic groups based on scope and resource deployments strategic dimensions were identified among forty-two global pharmaceutical firms. Significant differences in performance and sustainable growth capabilities were found within each group. There was also evidence of a significant correlation between sustainable growth capabilities and performance within each group. It is concluded that effects of firms' sustainable growth capabilities should be taken into account to improve the explanatory power of strategic groups in competitive performance.