Firm performance and aspiration levels as determinants of a firm's strategic repositioning within strategic group structures

Previous studies on strategic group dynamics have generated valuable insights into the industry-level determinants of changes in strategic group membership and group strategy. Complementary to this line of research, the present study focuses on the firm-level determinants underlying shifts in firm positioning within strategic group structures. Drawing on the behavioral theory of the firm, the study examines the influence of firm performance and performance aspirations on the extent to which firms strategically diverge from or converge towards their strategic groups. Empirical results from a longitudinal analysis of the strategic repositioning by 1191 US insurance firms over a 10-year time period (1999-2008) suggest that firms performing below aspirations show a greater inclination to diverge from their current strategic group than firms performing above aspirations. Industry conditions are found to moderate the relationship between performance aspirations and strategic divergence-convergence. The study's findings highlight the influence of performance feedback on strategic group dynamics, and the importance of considering the interplay between firm-level and industry-level characteristics in explaining strategic group dynamics.