The impact of environmental hostility on firm performance: A strategic orientation of manufacturing industries perspective

The aim of this dissertation intends to fill a gap in the literature by seeking to understand the determinants of environmental hostility and the impact they have on business-level strategic orientations within the manufacturing industry through two different firm performance outcomes. Research has provided evidence that different forms of environmental hostility exist, yet little has been done to discriminate between the different determinants and how firm financial and innovation performance may be impacted depending on the type of hostility encountered. Understanding the functional differences that exist within hostile environments and how they impact strategic orientations may be considerably more challenging. While recent literature has argued for specific strategic alignments when encountering environmental dimensions such as complexity and dynamism, little has been done regarding hostility. Borrowing and applying classical Contingency Theory from strategy, a set of hypotheses were developed relating the specific hostility attributes of competition, restrictiveness, declining market trends, and resource scarcity pressures on business-level strategy and the outcomes on firm performance. The resulting conceptual framework intends to provide insight into how researchers and practitioners alike can understand how the strategic orientations of manufacturing organizations are aligned when encountering different types of environmental hostility, filling a critical void in the literature stream.;Empirical data used to test the conceptual framework was conducted through quantitative survey methodology in which top-level management answered questions regarding different types of hostility in their operating environment, business-level strategic orientations, and firm performance based on the number of new and improved products and current financial health of the firm. The collected data was analyzed using multiple statistical tools, including exploratory factor analysis (EFA), confirmatory factor analysis (CFA), Structural Equation Modeling (SEM), non-parametric chi-squared tests, and bootstrapping procedures to evaluate the theoretically derived hypotheses. The results indicated that organizations' performance under hostile environments is impacted differently depending on the type(s) of hostility they are facing. Firms facing greater levels of competition experienced higher NPD performance while those encountering greater levels of restrictiveness and declining market trends resulted in lower NPD performance. Declining market trends also resulted in a direct negative impact on firm financial performance. Additionally, how an organization aligns their strategic orientation with the existent environment can impact performance outcomes differently. Increasingly entrepreneurial strategic orientations positively mediate the relationship between competition and financial performance and the relationship between resource scarcity and NPD performance. However, conservative strategies are more appropriate when facing greater levels of restrictiveness.