Firm and Industry Effects within Strategic Management 213 eity in turn leads to systematic differences in firm (Andrews, 1971; Ansoff, 1965), based on the performance within the same industry. Hence: industrial organization paradigm, are consistent with the structural determinants of competition Hypothesis 1: Core strategies and perform- discussed above. According to this perspective, ance within industries vary systematically with companies must develop strengths based on Key differences in firm-level characteristics Success Factors (KsF)that are stable and exter nally determined by the industry environment Industry-level drivers (Vasconcellos and Hambrick, 1989). Thi approach implies that firms in an industry con- Industrial organization researchers have argued verge towards competitive parity, thus enhancing that strategy and performance are primarily deter- their chances of survival( Barney, 1991) mined by the membership of an industry, and are When there is no clear understanding of the sustained through entry barriers. In this perspec- means-end relationship, firms should imitate the tive, the common structural elements of an indus- more observable aspects of successful strategies ry lead its members to share competitive charac- Managers pursuing the Ksf approach practice teristics. In a more dynamic context, as successful strategic benchmarking aimed at decreasing firms develop resources producing competitive petitive gaps(Colmen, 1993; Bogan and English dvantage, other firms are able to reduce competi- 1994). The practitioners collect competitive infor tive gaps by imitating these valuable resources. mation for imitation from different sources such As a result, convergent patterns of competition as reverse engineering, patent applications, indus- can become common industry characteristics try journals and magazines, financial statements, over time consultants, and ex-employees (Winter, 1987) Previous research has studied these convergent The industrial organization literature prescribes patterns for core strategies in technological and this approach marketing differentiation. For instance, in tech- Thus, shared industry characteristics such as nology development, firms share several charac- market structure and imitation of strategies lead teristics of the industry: direct competitors face to convergence of core strategies and performance similar technological opportunities for innovation among firms in the same industry and differences (Klevorich et aL., 1995: Cohen and Klepper, across industries. Therefore 1992), use a common protection mechanism for profiting from their technological investments Hypothesis 2: Core strategies and perform (Levin et aL., 1987),and share innovative ance vary systematically with differences in ditions derived from the underlying technolog life cycle(Utterback and Abernathy, 1975).L industry-level characteristics The behavioral explanation for homogeneity of strategies is more obvious for marketing expendi- COMPLEMENTARITY OF THE tures. They are easily observable and imitable- SCHOOLS ompetitors expenditures can be easily dupli cated Marketing expenditures may reach compa- This study argues that the above two hypotheses rable levels among competitors in an industry underlying resource-based view and the industrial because of similar conditions which determine organization schools within strategic management product differentiability Comanor and wilson, are complementary. Industry-level drivers that 1974), buyer characteristics(consumer or indus- promote homogeneity coexist with firm-level dri trial products ), stage in product life cycle, or vers that generate heterogeneity, just as various close rivalry(Kotler, 1994). Firms use advertising forms of competition coexist within the same to inform individuals about the quality of their industry. Firms invest upfront in resources that brand is better than those offered by rivals. In However, as industries evolve, imitation reduces such cases, advertising rather than price can the gaps and differences in resources between become the way in which competitors interact firms(Demsetz, 1973). The common nature of with each other (Scherer and Ross, 1990) customers,suppliers, products, technologies, and Prescriptions from early strategy literature competitive conditions leads to similarities with G 1998 John Wiley Sons, Ltd. sra:.Mgm.J,vol.19.2l-219(1998)