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Received 1 July 1997
Final revision received 6 August 1999
Key words: strategic fit; strategic change; contingency theory; resources; performance
This study develops and tests a dynamic perspective on strategic fit. Drawing from contingency and resource-based arguments in the strategy and organizational theory literatures, we propose a distinctive analytical approach to identify environmental and organizational contingencies that should predict changes in a firm's strategy and the performance implications of such changes. We test our model using extensive longitudinal data from over 4000 U.S. savings and loan institutions during a period when many S&Ls considered changing strategic direction. The findings support our model of dynamic strategic fit. Specifically, we find that (1) the timing, direction, and magnitude of strategic changes can be logically predicted based on differences in specific environmental forces and organizational resources, and (2) organizations that deviated from our model's prediction of dynamic strategic fit (i.e., changed more or changed less than our model prescribed) experienced negative performance consequences. We conclude by discussing the implications of our approach and findings for future research on strategic fit and strategic change. Copyright (C) 2000 John Wiley & Sons, Ltd.
One of the most widely shared and enduring assumptions in the strategy formulation literature is that the appropriateness of a firm's strategy can be defined in terms of its fit, match, or congruence with the environmental or organizational contingencies facing the firm (Andrews, 1971; Hofer and Schendel, 1978). Strategic fit is a core concept in normative models of strategy formulation, and the pursuit of strategic fit has traditionally been viewed as having desirable performance implications (Ginsberg and Venkatraman, 1985; Miles and Snow, 1994). Yet despite the concept's historical centrality and intuitive appeal, one finds relatively little explicit attention to strategic fit in the most recent strategy literature (Kraatz and Zajac, forthcoming). We believe that this situation may be attributable to three potential problems that have hindered the theoretical development and empirical testing of the concept of strategic fit.
First, some researchers remain justifiably uncomfortable with the static orientation that the concept of fit has historically implied (Miller and Friesen, 1984; Zajac and Shortell, 1989; Rajagopalan and Spreitzer, 1997; Bresser, 1998). While fit seems to imply a match at a single point in time, understanding...