An empirical analysis of the strategic group concept within the UK construction industry

Abstract

Strategic group theory has become a popular tool for analysing the competitive structures of industries. A 'strategic group ' is a group of firms in an industry following the same or a similar strategy along strategic dimensions. Since its initial development in the early 1970s by Hunt, the concept of strategic groups has initiated a plethora of empirical research in both the industrial organisation economics and strategic management dliscipliiies, emphasising the importance of strategic groups in understanding the differences across firms within an industry. Despite the rich theoretical tradition from which the strategic group concept is derived and the numerous empirical efforts to test its implications, there is no consensus concerning the appropriate method to identify strategic groups. In addition, a number of important questions concerning this concept remain unanswered and many previously researched issues require further refinement. This study was concerned with the development of a general framework for formulating strategic groups within the UK construction industry and examining both the dynamic characteristics and the performance implications of strategic groups membership. The focus of this thesis was at the corporate level of 35 UK construction firms for the period starting from 1986 to 1991 inclusive. To operationalise the strategy concept the study utilised two components of strategic decisions, namely scope and resource allocations. The findings of the longitudinal analysis demonstrated that the construction industry has witnessed significant structural transformations over the study period. The number, location, and composition of strategic groups has changed over time in accordance with changes in key strategic dimensions. The results also demonstrated that there is partial support for the existence of performance differences among strategic groups. The m2jor contributions of this study are the development of a general framework for formulating, interpreting, and validating the identified strategic groups; the detailed measurement of the strategy concept; and the longitudinal analysis of the dynamic and performance implications of strategic groups. The application of the strategic group concept to a diversified and complex industry such as the UK construction industry provided more insight into the strategic group phenomenon and its usefulness to strategic management analysis. The developed methodology has a potential for providing a comparative basis for future longitudinal research on strategic groups in other industries.