SPECIALIST STRATEGY

Specialist Strategy



Specialist Strategy

Introduction

Organizations are in general considered to be highly reliant upon a complex set of social and material resources from their external environments (Aldrich, 1979; Pfeffer & Salancik, 1978). The ecological approach holds that fitness to the resource bequests available in organizations' external environments in due course establishes firm's success and survival. Most interestingly, firm's environments are considered as diverse, discontinuous and unstable (Hannan & Freeman, 1989). The diversity and discontinuity consequences in special combinations of environmental resources and conditions called niches (Hannan et al., 1977). Specific firm's structures are likely to develop around such niches, where organizations characterizing the structure are able to make use of the niche-specific resource combinations in an optimal manner compared with any other structure (Freeman et al., 1983). Thus a niche can be defined as the set of social, economic, and political resources and conditions from the environment that are required for organizations characterizing a particular structure to continue (Hannan et al., 1977).

Firm's structures are abstract firm's “blueprints” (Hannan et al., 1977) or “identities” (Polos, Hannan, & Carroll, 2002) that get realized as spatially and temporally bounded firm's populations, whose members share a common structure, i.e. are similar in a fundamental manner. However, it is essential to note that firm's structures are likely to be hierarchical, and different kinds of sub-structures (and thus sub-populations) may develop under a general structure (Carroll & Hannan, 2000; Mattsson, 2008; McKendrick & Carroll, 2001; Ruef, 2000). Even though the general environmental niche is the same for all sub-structures, specific sub-structures may occupy distinct positions (resource combinations) within the niche, such as specialist vs. generalist organizations.

The generalists argue that mature organizations should diversify'—-either at the business unit level through product line development or at the corporate level through acquisition or establishment of other firms, it is an adage of conventional strategic theory. Since at least Alfred Chandler's classic analysis of strategy and structure in four large American firms,' strategy theorists have implicitly assumed that expansion of an organization's resource base spurs new growth and reduces overall risk. These views are most clearly seen in the widely used models of the organizational life cycle, wherein linear sequences of strategies are prescribed to ensure success with aging of the organization. In all life-cycle models, small successful organizations are advised at some point to diversify—failure to do so presumably cripples.

This advice is well accepted, in part because it is based on painstaking empirical research. Typically in such research, investigators select large and successful organizations for study. Through comparison with less diversified organizations, the advantages of diversification are identified. Through retrospective analysis, researchers also commonly find that large diversified organizations used to be smaller and more specialized. The key to success for many of these small specialized organizations was apparently the act of diversification. Thus, managers are advised to extend their strategic base, either in line of business or overall corporate activity. Such advice is based on fallacious reasoning for two reasons, both arising from the selective and retrospective ...