Identifying Sources of Heterogeneity for Empirically Deriving Strategic Types : A Constrained Finite-Mixture Structural-Equation Methodology

The resource-based view (RBV) of the firm suggests that strategic deployment of capabilities allows strategic business units (SBUs) to exploit distinctive competencies and create sustainable competitive advantage. Following the RBV, we propose a new predictive methodology for deriving typologies of SBUs that accommodates heterogeneity among SBUs with respect to their strategic capabilities how effectively they are employed, and performance. Statistically, we devise a constrained finite-mixture structural-equation procedure that simultaneously accounts for firm capabilities, performance outcomes, and the relationships between them. Using data from 216 US SBUs, the results show that our derived four mixed-type solution dominates the four group Miles-Snow classification as well as a number of other nested model solutions, suggesting a more contingency-driven strategic stance adopted by these SBUs