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Abstract
The purpose of this research is two-fold. We first want to demonstrate the use of measures of efficiency and effectiveness to create a typology that is useful for classification of organizational performance. The research further reveals the relationships between the proposed performance typology and various business-level strategies. The findings of this research indicate that strategy selection impacts the proposed performance typology of efficiency and effectiveness. The study concludes with a discussion of our findings and addresses directions for future research.
Keywords: Strategy-performance Relationship, Performance Typology, Business Strategy
Among the most salient of debates in the field of strategic management are those on conceptualizing and measuring firm strategy and performance. Since Barnard's (1939) conceptualization that organizations can strive to achieve both efficiency and effectiveness in performance, a number of researchers have investigated the antecedent evidence of these two dimensions (Katz and Kahn, 1978; Kotabe, 1998; Miller, 1981; Ostroff and Schmitt, 1993; Steers, 1975). Although the criteria used to assess organizational performance have been quite diverse (Steers, 1975), virtually all of these criteria can be subsumed under the two distinct dimensions of effectiveness and efficiency. The first of these is termed efficiency. Efficiency refers to the amount of output obtained from a given input. The second aspect of firm performance is effectiveness. Effectiveness refers to the resource-getting ability of an organization. According to Ford and Schellenberg (1982), organizations experience higher returns when both dimensions are emphasized.
Researchers examining organizational performance have investigated numerous issues in an attempt to measure what is often classified as being either successful or unsuccessful firm performance. However, research has failed to examine the multidimensional nature of the performance construct (Cool and Schendel, 1987; Ford and Schellenberg, 1982). Because of the inherent difficulty in classifying a firm's performance level, researchers have suggested measuring performance using a number of different criteria in order to capture a firm's true performance level (Katz and Kahn, 1978). Katz and Kahn (1978) suggest that the best-performing organizations tend to be concerned with both efficiency and effectiveness. Ostroff and Schmitt (1993) findings imply that organizations can excel in one of those dimensions, both or neither.
Because organizations measure their performance level using multiple criteria, researchers also should attempt to capture a firm's performance level from as...