Abstract/Summary

This study concerns the behavioural aspects of strategic decisions and focuses on the role of executive values in strategic decisions and its performance impact. The study investigates the relationship between strategic-, executive values- and goal orientation, contextual variables and their impact on performance. The research extends Thomas and Ramaswamy's (1996) examination into the leadership-strategy relationship, which confirmed that particular executive characteristics impact performance of the Miles and Snow's (1978, 1994, 2003) strategic typologies. The current study extends their research by: i. Using primary rather than secondary data, ii. Expanding the number of Miles and Snow (1978, 1994, 2003) typologies tested from two (prospectors and defenders) to all four (including analyzers and reactors), iii. Introducing the new constructs of executive values and goals, iv. Extending the performance construct to include operational as well as financial measures of performance. The current research tests hypotheses based on theoretically expected outcomes concerning the main and interaction (alignment) effects of the research constructs of strategic-, executive values- and goal orientation and manageria/-,firm- and industry characteristics on organisational performance. Data was collected from 163 owner/managers, senior managers and middle managers and the sample frame was broad in size and scope including the international business community without particular profiling. Biases were examined but none were found. Empirical investigation involved the use of Exploratory and Confirmatory Factor Analysis and Multi-way Analysis of Variance. The results of the current research found that organisational performance is best explained by mangers' strategic choices in an industry context as predicted by the strategic choice (Child, 1972) view. An overall model including industry characteristics produced more significant results than without contextual variables indicating that the interaction effects of industry are more important than previous leadership-strategy studies. Empirical support for the performance impact of executive values contributes to the understanding of executive values in strategic decisions by confirming the upper echelon theory (Hambrick and Mason, 1984) and theoretical conjecturing concerning its importance in strategy formulation (Andrews, 1987; Finkelstein and Hambrick, 1996; Guth and Taguri, 1965; Hambrick and Brandon, 1988; Learned et al., 1965; Porter, 1980). Moreover, executive values had the greatest performance impact in alignment with entrepreneurial organisational goals substantiating executive values' impact on the direction of the firm (Donaldson and Lorsch, 1983; Steiner, 1969) and affinity with Senge's (1990) notion of 'shared values', 'strategic intent' (Hamel and Prahalad, 1989, 1994) and Reich's (1998) 'sense of mission'. A contribution to the debate concerning the association of psychological and observable factors of strategic choice (Finkelstein and Hambrick, 1996) is made by executive values' greater performance impact than tenure indicating that values are more important than demographic variables in the causal chain of fundamental executive characteristics to performance. Furthermore, a two-way interaction between executive values and tenure was also found as predicted by ·Finkelstein and Hambrick (1996). Finally, tenure's interaction with strategic and goal orientation supports previous studies concerning tenures' linkage with strategic persistence (Finkelstein and Hambrick, 1990) and commitment to the status quo (CSQ) (Hambrick et al., 1993). Further research is indicated in the development of executive values categorisation, values-based management ideal-typing of the Miles and Snow types, exploration of other executive orientation factors and further investigation into the relationship between strategic orientation and industry differentiation.