Nested identities as cognitive drivers of strategy

• Author: Anne Parmigiani,Jennifer Irwin,Brooke Lahneman
• DOI: http://doi.org/10.1002/smj.2735
• Date: 01 February 2018
• Published date: 01 February 2018

RESEARCH ARTICLE

Nested identities as cognitive drivers of strategy

Jennifer Irwin

1

| Brooke Lahneman

2

| Anne Parmigiani

3

1

Lycoming College, Williamsport, Pennsylvania

2

Jake Jabs College of Business and

Entrepreneurship, Montana State University,

Bozeman, Montana

3

Lundquist College of Business, University of

Oregon, Eugene, Oregon

Correspondence

Brooke Lahneman, Jake Jabs College of Business

and Entrepreneurship, Montana State University,

P.O. Box 173040, Bozeman, MT 59717-3040.

Email: brooke.lahneman@montana.edu

Research Summary: Organizations face tensions to con-

form to industry norms for legitimacy yet differentiate for

competitive advantage when implementing strategies. We

suggest this tension is due to and resolved through orga-

nizations’cognitive negotiations of multiple levels of

identity. Through an inductive study in the recreational

vehicle industry, we find that organizations concurrently

draw on identities at the organizational, industry, and

strategic group levels to formulate and enact specific

competitive actions. Specifically, we find that organiza-

tional identity relates to decisions on product offerings;

industry identity relates to downstream strategy; and stra-

tegic group identity relates to upstream strategy, firm

boundaries, and expansion mode. Our findings highlight

the importance of strategic group identity and inform a

grounded model describing how organizations draw upon

different levels of identity to influence strategy.

Managerial Summary: Many managers experience ten-

sions of differentiating their firms’competitive actions

from rivals, while conforming with industry norms and

practices. In this article, we argue that a manager can

navigate these tensions by understanding their firm, stra-

tegic group, and industry identities and how these identi-

ties interrelate. Through a qualitative case study of the

U.S. recreational vehicle industry, we show that each

level of identity influences different competitive actions,

with firm identity connected to product offerings, indus-

try identity related to managing downstream distribution,

and strategic group identity related to firm boundary and

acquisition strategies. Overall, strategic group identity is

the most critical for managers as this level filters how

they view competitors and provides the rules of

competition.

Authors contributed equally and are listed alphabetically.

Received: 21 November 2016 Revised: 10 October 2017 Accepted: 19 October 2017 Published on: 12 December 2017

DOI: 10.1002/smj.2735

Strat Mgmt J. 2018;39:269–294. wileyonlinelibrary.com/journal/smj Copyright © 2017 John Wiley & Sons, Ltd. 269

KEYWORDS

cognition, competitive dynamics, identity, strategic

groups, strategy implementation

1|INTRODUCTION

Organizations face a constant tension to maintain legitimacy by conforming to industry norms, but

also to differentiate by creating a distinctive market presence and competitive position (Deephouse,

1999; Lieberman & Asaba, 2006). From a strategic perspective, organizations establish their posi-

tions through actions to implement their corporate strategies, such as firm boundary decisions, entry

modes, and management of interfirm relationships, and to implement their business strategies, such

as product offerings. Rivals and industry stakeholders can observe these competitive actions, which

are influenced both by economic drivers, such as supply and demand conditions and production

technologies, and by cognitive drivers, such as how managers interpret and process information

about their own organization, competitors, and the industry (Nadkarni & Barr, 2008; Reger & Huff,

1993). Whereas most work in strategy focuses on economic drivers, this paper examines cognitive

drivers, specifically identity.

Organizational competitive actions are influenced by factors at multiple levels: the organization,

the industry, and the strategic group. Work in organizational economics indicates each level influ-

ences strategy and performance (Porter, 1980; Short, Ketchen, Palmer, & Hult, 2007). Research on

strategic fit highlights coherence and combines multi-level factors to understand their influence on

these actions such as firm boundary decisions, distribution channels, and product offerings (Fisher,

1997; Siggelkow, 2001; Teece, Rumelt, Dosi, & Winter, 1994). This work tends to focus on eco-

nomic drivers, such as capabilities, whereas related work on multi-level interpretive cognitive ele-

ments has been scant. This is an important omission as a manager’s view of the environment affects

organizational actions and strategies (Eggers & Kaplan, 2013; Kiss & Barr, 2015; Narayanan,

Zane, & Kemmerer, 2011; Porac, Thomas, & Baden-Fuller, 1989). Our study addresses this gap by

investigating the cognitive driver of identity, exploring the relationships between levels of identity,

and connecting these multiple levels of identity to competitive actions.

Identity is defined as those characteristics that are central, enduring, and distinctive at organiza-

tion (Albert & Whetten, 1985), industry (Dhalla & Oliver, 2013), and strategic group (Peteraf &

Shanley, 1997) levels, primarily observable to insiders participating at those levels. Identity as a con-

struct allows scholars to explore how cognitive processes in an organization are related to competitive

actions and competition at organization, industry, and strategic group levels (Ashforth, Rogers, &

Corley, 2011; Hsu & Hannan, 2005; Porac, Thomas, & Baden-Fuller, 2011). Although acknowledg-

ing that multiple levels exist, studies rarely combine these levels to understand how organizations

draw concurrently on various levels of identity and how these relate to competitive actions, defined as

observable behaviors “taken to select and implement the firm’s strategy”(Ireland, Hitt, Camp, & Sex-

ton, 2001).

1

Thus, our study asks: How do organizations negotiate tensions in strategic positioning at

1

Ireland and colleagues use the term “strategic actions”; we chose the term “competitive actions”for these same activities to avoid

confusion with “strategic groups.”

270 IRWIN ET AL.