The purpose of the present research is to examine the relationships among industrial environment, strategy, resource capability, organizational structure, and performance in order to better understand organizational adaptation within an industry in Korea. Accordingly, the following research questions were addressed in the context of the Korea's computer industry for the period 1981 - 1986 : (1) How do firms formulate business strategies within an industry? (2) Which relationships have strategy and structure at the business level? (3) Which factors determine business performance within the industry? (4) How stable are strategic groups and strategic group membership? How do firms pursue the strategic shift? (5) How does the industrial environment affect the strategic behavior and the organizational structure of firms? (6) Which factors cause the rapid growth of the Korea's computer industry? Which strategies do firms deploy to acquire technological capability and what effects do they have on industry performance?
For conceptualization, this study used two complementary approaches. First, the theoretical relationships among environment, strategy, resource capability, and organizational structure were deductively identified by reviewing the existing literature. Second, based on the inductive analysis of the Korea's computer industry, two time periods representing different environmental characteristics (1981 - 1983 and 1984 - 1986) and strategy variables notably influencing competitive advantages of firms were identified. Integration of both the inductive and deductive approaches led to 11 hypotheses. The longitudinal data for testing these hypotheses were collected from 54 computer-hardware manufacturing firms.
The major findings of this study are as follows:
(1) 4 strategy types (OEM production, differentiation by foreign brand, differentiation by technological innovation, industry domination) were identified. These types, which to some extent reflect distinctive characteristics of the industry in a developing country, might be considered as variations of Porter's generic strategies.
(2) Industrial environment and resource capability affected strategic selections of firms: a) Number of strategy types potentially selected by firms and some of major strategy items composing each strategy type were different between the two time periods differing in the demand level and the competitiveness: b) Firms with different types of resource capability selected different strategy types.
(3) Firms with different strategy types had significantly different structural characteristics at the business level. Structure of differentiation strategies was more organic than that of "OEM production" strategy. "Industry domination" strategy displayed divisionalized one.
(4) Firms using different strategy types differed in their performance levels, depending on the nature of the industrial environment and the performance measures used. Especially, in the second time period with more competitive environment and higher demand level, firms emphasizing differentiation strategies outperformed firms emphasizing "OEM production" strategy in terms of sales growth rate and return on total assets. Firms "stuck in the middle" outperformed those emphasizing generic strategies in terms of profitability in the first time period with less competitive environment.
(5) Firms using different strategy types differed in the relationships between organizational structure and profitability. While firms emphasizing "OEM production" strategy had the positive relationships between variables representing mechanistic structure (e.g., formalization) and profitability, firms emphasizing "differentiation by technological innovation" strategy had the negative relationships between such variables (e.g., formalization, number of hierachy, technostructure) and profitability.
(6) Strategic groups were observed for all periods in this research. Strategic shift of firms, or moving from a strategic group to other or new one, was associated with changes of their resource capability and organizational structure.
(7) Changes of the industrial environment differently affected on strategic behaviors and organizational structure of firms using different strategy types: (a) Strategic variables of different strategic groups changed in the different ways according to the two time periods; b) While the increase of the demand level and the competitiveness made structure of overall firms become more bureaucratic, the degrees of such tendency varied according to strategic groups.
(8) Firms which entered the industry with different degrees of production and innovation capability deployed different strategies to acquire technological capability and made different contributions to industry performances such as employment, export, and innovativeness.
The major contributions of this study are, (1) the development of a more comprehensive theoretical framework for organizational adaptation within the industry, (2) the identification of dynamic relationships among strategy, structure, and performance, and (3) the development of some insights into strategic change.
