| Strategic adaptation involves the ability of an organization to cope with new realities in its operating environment. This concept has been used to explain why some companies succeed, and others fail, or why some companies continue to succeed and sustain advantage, while other successful companies abruptly vanish. Drawing upon theoretical research in the strategic management field, we propose that strategic adaptation ability of a firm is a function of two types of coherence or alignment: (a) the alignment among the strategy, structure and culture within the organization or internal alignment , and (b) the alignment of the organization as a whole with the external environment or external alignment.; We focus on the recent history of the technology-intensive, rapidly changing telecommunications equipment industry in the United States to understand the phenomenon of strategic adaptation. Since firm performance is a function of strategic adaptation ability, we identified the most and least adaptive firms from the panel of firms in this industry based on their performance over a 10-year period, 1990–1999. Recognizing the multidimensional nature of performance, we employed multiple accounting, strategic, and stock market based measures to estimate firm performance. Internal and external alignment dimensions were quantified using a wide range of variables drawn from literature in the strategy field. Content analysis of the SEC 10K reports was used to identify the alignment characteristics of the firms.; By relating performance differentials between the top and poor performers to differences in their alignment properties, we validated the hypothesized relationships between strategic adaptation ability and alignment characteristics. The results of analysis overwhelmingly favor all the three research propositions: (1) The most adaptive firms in this industry (high performers) possess on average a higher degree of internal alignment as compared to the least adaptive firms (low performers). (2) High performers an average exhibit a higher degree of external alignment as compared to low performers. (3) High performers on average have a higher degree of overall alignment as compared to low performers. These findings were found to be true for each of the six measures used to estimate firm performance, and also the overall performance measure. Winners excel uniformly in terms of internal alignment, external alignment, and overall alignment as compared to losers in all performance dimensions. However, the contribution of different alignment characteristics to various dimensions of performance is different. Managers should therefore prioritize what dimensions of performance are relevant for the company in the short and long term, and configure the firm's alignment characteristics accordingly. This dissertation has also developed a framework that can be used as a template for strategic adaptation studies in other industries. |
