A tale of two paths: Performance heterogeneity driven by resource employments in the pharmaceutical industry

Abstract

Purpose

Based on a strategic group concept, the purpose of this paper is to examine the effects of resource employments on persistent performance in the pharmaceutical industry.

Design/methodology/approach

In departing from previous research, this paper takes an inverted approach to mapping firms into heterogeneous groups with distinct long-term performance trajectories, given that strategic profiles and characteristics were unknown. The methodology used is latent class growth analysis, a person-centred approach focussing on the relationships among individuals. Regression models were subsequently used to examine the strategy variables-performance relationship between groups and within groups.

Findings

First, firms were grouped into upper-performance and lower-performance trajectory subpopulations. Second, the effects of marketing and R&D on performance significantly differed within subpopulations and presented a U shape or an inverse U shape relation. Third, the employment of R&D resources was more effective in the lower-performance trajectory group, the average scale of which is smaller than in the upper-performance trajectory group. On the contrary, the employment of marketing resources had a greater benefited in the upper-performance trajectory group.

Research limitations/implications

Intangible strategy features are ignored due to measure problem in the long period.

Practical implications

Strategic competition is more significant among intragroup members than inter groups. That the U-shape or invert U-shape effects of resource employments on performance among intragroup members reminds the researchers that the law of diminishing return or increasing return should not be ignored when test the group-performance relationship in future research.

Originality/value

The current study introduces an effective approach to investigate the strategic group concept.

Citation

Liou, F.-m. (2020), "A tale of two paths: Performance heterogeneity driven by resource employments in the pharmaceutical industry", Management Decision, Vol. 58 No. 1, pp. 1-15. https://doi.org/10.1108/MD-09-2017-0834