Organizational alignment as competitive advantage

Abstract In explaining financial performance variance, strategic management researchers and industrial organization economists have emphasized industry factors, market share, generic strategy, and strategic group membership, whereas organizational contingency theorists have emphasized alignments involving environment and internal structure. This study integrates these perspectives, testing the financial performance consequences of organizational alignments, in context with the effects of industry, market share, and strategy. In an empirical study in two manufacturing industries, it is shown that some organizational alignments do produce supernormal profits, independent of the profits produced by traditional industry and strategy variables. The results are consistent with the resource view of the firm: to the extent that alignments result from skill rather than luck, it is reasonable to regard alignment skill as a strategic resource capable of generating economic rents. The article suggests that, by focusing on industry and competitive strategy variables, contemporary industrial organization and strategy research has understated the role of organizational factors in producing sustainable competitive advantage.