Strategy making and performance Reliability Analysis Lukas Meusburger.

Strategy making and performanceReliability AnalysisLukas Meusburger

Strategy-making is beleived to be a key determinant of corporate performance

Strategy-making Performance

…

• Link between strategy making and performance received considerable attention

• Idea is that the quality of the strategy making process is a determinant of the strategy-contents

Reliability-Analysis.pptx

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Strategy making as a field of research

Messy field, that cannot advance in a straigt line (unlike accounting) (Jarzabkowski & Whittington, 2008; Powell, 2002)

No unifying framework: numerous ones have been proposed Emergent vs. Intended (Mintzberg) command, symbolic, rational, transactive and generative

(Hart) participative, entrepreneurial, adaptive and simplistic (Dess) Central – Dencentral (Andersen)

SEITE 3Reliability-Analysis.pptx

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Operationalization in Paper-Survey with top 1000 firms, response rate about 12%


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Strategy-making process is characterized by four dimensions

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Formalizationto how well established and

codified the routines of strategy making are and how much mid-

to long-term planning is emphasized within the firm

(De)centralizationhow far institutions away from the CEO are playing an active

role in strategy making

FlexibilityAre processes and underlying assumptions of established routines challenged if the

respective environment changes & accommodation of new ideas

from within

OpennessStakeholder engagement: extent

to which stakeholder interests are considered in the formulation

of the strategy Open strategy: Active

participation of external actors

Can be present simulatneously and to a different different depending on the respective organization


Each construct of the strategy making process was operationalized with a number of questionnaire items

Internes Arbeitspapier – Projekt

Table 1: model constructs for characterization of the strategy process

Construct Questionnaire items Derived from

Formalization Process regularity Hart et al. (1994), Dess et al. (1997) Emphasis on analytics in strategy process Hart et al. (1994) Emphasis on strategic mid- to long-term plan-

ning Andersen (2004) Use of strategy tools in strategy formulation Frost (2003) Existence of a distinct Strategy-department Papadakis et al. (1998)

Decentralization Centrality (geographic and hierarchical) of insti-tution (role) taking the lead in strategy processes

Andersen (2004), Hart et al. (1994), Dess et al. (1997)

Participation of middle managers Andersen (2004), Dess et al. (1997) Participation of operative personnel Andersen (2004), Dess et al. (1997) Decentralized decision authority Andersen (2004)

Flexibility Adaptation of tools according to specific needs Hart et al. (1994) Challenging routines and assumptions when

environment changes Hannan et al (1984), Sharfman et. al (1997)

Presence of strategies which emerged without being planned

Dess et al. (1997), Mintzberg (1978)

Risk aversion in selection of strategic options (3 items)

Hart et al. (1994), Dess et al. (1997)

Failure culture Hart et al. (1994), Dess et al. (1997)

Openness Stakeholder engagement (2 items) Freeman et al. (2010) Stakeholder participation / open strategy

(2 items) Laursen et al. (2006), Dess et al. (1997)

Question number 1: Do the four constructs measure what they are supposed to measure?

Question number 2: Can an effect on corporate performance be discovered?


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boxplot(FORMAL_SUMME, FLEX_SUMME, DEZENT_SUMME, OFFENSTAKE_SUMME, names = c("Formalisierung", "Flexibilität", "Dezentralisierung", "Offenheit"))


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What is reliability?

Completing a survey a person should – all other things being equal – get the same result at two different points in time

Two people who are the same – in terms of the construct being measured – should get the same result

In statistical terms: individual items of a questionnaire should produce results consistent with the overall questionnaire


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Ways to measure reliability

Most common way: Cronbach‘s Alpha Expected correlation between two tests that measure the

same construct Average covariance between item pairs and variance of the

total score Widely used as a measure of internal consistency

α < 0,5 … unacceptable 0,5 < α < 0,6 …poor … α > 0,9 … excellent


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Onew way to measure Cronbach‘s alpa in R

CronbachAlpha --> Simple function that generates a value without any further options, requires a data frame

FORMALNA <- na.exclude(data.frame(X5_formal_period, X6_formal_analyse, X7_formal_umsetzung, X8_formal_planung))

CronbachAlpha(FORMALNA) # Shows Value for Cronbach Alpha

0.8752851 Very good internal consistency!


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More advanced option

alpha(FORMAL, keys=NULL,cumulative=FALSE, title=NULL, max=10,na.rm = TRUE, check.keys=TRUE,n.iter=1,delete=TRUE) #

Shows more complete data for Cronbach Alpha Allows for reverse coded items (keys) Shows values for when an item is dropped from the analysis See

example with flexibility in R


Optical check to see correlation between the parts of the construct

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Optical check confirms results

Var_Formal <- rowMeans(FORMAL)

Rest of analysis and first attempts for regression analysis see R-Code


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Possible extensions, yet not implemented in detail so far

Principal component analysis See first intro in R

Confirmatory Factor Analysis (CFA)

Homogeneity Analysis Homals package


Strategy making and performance Reliability Analysis Lukas Meusburger.

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