Differentiation, Conformity, and Construction Firm Performance

Abstract

Competitive strategy and neo-institutional scholars offer different views for studying a firm’s relationship with its environment. Competitive strategy scholars propose that a firm’s environment hosts competitive forces and that a firm’s performance is closely related with its ability to differentiate itself from its rivals. Neo-institutional scholars, on the other hand, propose that a firm’s environment hosts institutional forces and that a firm’s performance is closely related with its ability to conform to institutional norms. The research presented here builds on the premise that the propositions set forth by competitive strategy and neo-institutional scholars are complementary rather than contradictory. It empirically explores these propositions in the context of the U.S. construction industry. Research findings provide considerable empirical support for the competitive strategy scholars’ proposition that differentiation vis-à-vis rivals is positively related with a firm’s performance. On the other hand, research findings do not provide any empirical support to the neo-institutional scholars’ proposition that conformity to regulatory and societal expectations is positively related to a firm’s performance.