A data envelopment analysis-based framework for strategic group analysis: Empirical investigation in the hospital industry

The strategic group theory, due to its conceptually intuitive appeal, emerged right from its inception in strategic management research, as one of the most popular tools for analyzing the competitive structure of industries. However, in spite of the spate of research studies on the subject, the strategic group concept has remained somewhat inchoate and has not yet proven to be the useful tool it promised to provide to strategic management.; The lack of a clear theoretical definition of the strategic group concept spawned diverse procedures to operationalize it. Consequently, findings from strategic group research studies present conflicting results indicating unresolved issues of theory and methodology.; This study seeks to develop some theoretical foundation to buttress the intuitive appeal of the strategic group concept and arrest both the conceptual and operational ambiguity surrounding it. To this end, this study draws on the theories and inherent characteristics of the concept of strategy to determine the modus operandi of the strategic group concept. It uses Data Envelopment Analysis (DEA), an approach hitherto unused in strategic group research, to determine the efficiency measures and the peer strategic groups of the firms in the study sample.; Data Envelopment Analysis is a linear programming-based performance modeling tool whose structural properties make it suitable to determine strategic grouping. It circumvents most of the subjectivity with which current strategic group methodologies are riddled and therefore, offers a potentially superior method for determining strategic grouping.; The adaptation of DEA for this novel application of operationalizing strategic grouping, necessitated a modification to the DEA formulation. One of the major contributions of this study is this modified DEA formulation that offers a tie-breaking strategy for selecting a unique optimal solution.; The thesis of this study is that DEA is a valuable research methodology that can be used to establish a framework by which the strategic group concept may be systematically operationalized. The contribution of such a framework cannot be overemphasized as it would potentially allow the strategic group concept to rise to its promise of a valuable strategic management tool useful for determining the underlying workings of competition in industry.