Strategic repositioning, mobility barriers and performance: An empirical investigation of the United States domestic airline industry (1969-1988)

Research in the field of strategic management often assumes stability of the industry and focuses on the static relationship between strategy and performance. However, firms pursuing a long term competitive advantage need to recognize the changing nature of their firm, competitors, and industry. Instability may more closely characterize the industry setting for competition over time. To date, few studies have investigated industry changes acknowledging periods of stability and instability and the corresponding implication for strategy and performance. This study investigates the changing nature of strategy and performance of firms in the US domestic airline industry from 1969-1988. The industry was chosen for its periodic instability and experience with the exogenous shock of the Airline Deregulation Act of 1978. After identifying stable and unstable periods through quantitative and qualitative analyses, hypotheses focusing on changes in strategic repositioning, mobility barriers, and performance were tested. Major findings suggest that increased strategic repositioning is associated with industry instability. However, just prior to the exogenous shock strategic repositioning accelerated to levels greater than any period after deregulation. Further, strategic viability and mobility barriers demonstrated a curvilinear relationship. Strategic groups that moved incrementally against industry-wide mobility barriers realized the greatest viability. In contrast, groups that either moved significantly or minimally showed the least viability. During the deregulated period, higher performance was associated with the more strategically stable positions. Under regulation, performance did not vary with strategic stability or instability. Implications for strategy researchers and managers converge on the need to recognize the past and present effect and future implications of the industry context on the evolving competitive patterns. Mobility barriers should be examined for their potential impact on facilitating (low mobility barriers) or inhibiting (high mobility barriers) strategic repositioning. Future research could investigate other industries experiencing periodic stability and instability (domestically and internationally). In addition, managers could be studied to identify the actions associated with their interpretation of industry dynamics and strategic change.