Strategy and Performance: Does Environmental Dynamism Matter?

ABSTRACT

This paper examines the moderating role of environmental dynamism on the link between strategy and performance. Based on a random sample of micro and small businesses (MSBs) in an emerging economy – Ghana, this study tests the applicability of the strategic-fit paradigm, which assumes that positive organizational outcomes require a match between environment and strategy. Using confirmatory factor analysis and ordinary least squares regression techniques, the results show that MSBs pursuing low-cost strategy in a dynamic environment may have higher performance while those pursuing differentiation strategy in a dynamic environment may have lower performance. The results suggest that MSBs should enhance the implementation of cost-leadership strategy when environmental dynamism is high and implement differentiation strategy only when environmental conditions are stable.

KEYWORDS:

• Differentiation strategy
• cost leadership
• environmental dynamism
• strategic fit

Disclosure statement

No potential conflict of interest was reported by the authors.