Abstract

Matching a firm’s strategy and structure is key to achieve superior firm performance (Covin & Slevin, 1988). While the contingency relationship between a firm’s corporate strategy and its internal administrative structures has repeatedly been subject to extant research (Wasserman, 2008) there is a paucity of studies that ‘extend the question of strategy/structure fit issues for other structural forms of organization’ (Yin & Zajac, 2004). The present study develops and empirically tests a fit-as-moderation model that theorizes that firm performance is influenced by the contingent effects of the structure of a firm’s external transactions on its strategic orientation. The design of transactions with external constituents (e.g. customers, suppliers, or partners) is captured by the focal firm’s business model (George & Bock, 2011). The continuous pursuit of bringing novel elements into this transaction design is what extant literature calls business model innovation, BMI (Amit & Zott, 2010). In the context of our study, BMI represents a contingency factor on a firm’s strategy, as represented by its innovation orientation (IO), and market orientation (MO). We hypothesize a good fit between IO and BMI. A (responsive) MO is a business’s attempt to understand and to satisfy customers’ expressed needs (Narver et al., 2004). Extant research has argued that following customers expressed needs fosters several aspects of performance, but limits the development of truly novel products (Christensen & Bower, 1996). Correspondingly, we hypothesize that BMI will show poor fit with a market oriented behavior of the firm and therefore have an extenuating effect on the relationship of MO on firm performance.

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