1

Strategic Stance of Management Team and New Product Performance: Resource

Advantage Theory Perspective
ABSTRACT
By using R-A Theory perspective, a conceptual framework is offered, that is purposed of seeking
two questions (1) what are antecedents of strategic stance of management team toward
innovation (proactive vs. reactive) and (2) does proactive or reactive strategic stance of
management team influence on decision making of new product performance and ultimately
profits of a firm. Developed hypotheses suggest those links, including moderating effects of
environmental turbulence factors.

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INTRODUCTION
Resource Advantage Theory (hereafter R-A theory) puts major emphasis on firms comparative
advantages in resources which later result in competitive positional advantages in the market
and, ultimately, in superior financial performance. Since its advent, R-A theory has been applied
in various fields, like business alliances (Wittmann et al 2009), the role of financial market
perception (Lovett and MacDonald 2002), market segmentation strategy (Dowling 2004), and
economic growth (Hunt 2007). The theory, however, has still many aspects to be explored. For
example, even though it claims that innovation is endogenous in the theory, innovation and new
product performance are two constructs hardly operationalized or discussed within it. Also,
another limitation is that the environmental factors that, according to the theory, influence in a
relevant way the competitive process in the market, are still not clearly defined or explained. In
the view of these concerns, this study focuses on discussing whether comparative advantages in
resources have impact on the management team choice of strategic stance over innovation, and
what the consequences of this choice are under a situation of environmental turbulence.
Environmental turbulence dimensions (i.e. market turbulence, technological turbulence, and
competitive intensity) share, to some extent, similar concepts. For example, market turbulence
might be related with consumer and competitor. Those three factors of environmental turbulence
have been studied in the context of market orientation, mainly as moderators (e.g. Han et al
1988; Jaworski and Kohli 1993; Kirca et al 2005). Not much differently, they deem moderators
for relationships between resource advantage and senior managements strategic stance, and
between its strategic stance and new product performance that are defined by quality, speed to
market, and speed in production process.

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Overall, this study focuses on understanding antecedents of management teams strategic stance
on innovation or new product development and the connection between that stance and new
product performance. Accordingly, there are three objectives; (1) delving into management team
characteristics and resource advantages as antecedents of firm management teams strategic
stance, (2) understanding how strategic stance influence profits of a firm, and (3) what are the
moderating effects of environmental turbulence in this relationship.
We start by giving the theoretical background of the study, with the discussion of some
constructs from R-A Theory and management resources theory. We follow by introducing a
conceptual framework on how the firm resources influence its strategic stance choice proactive
or passive and the consequences of this choice, developing some hypotheses about this
relationship. In the end, we discuss some implications of this study for the marketing literature
and practice.
THEORETICAL BACKGROUND
Resource-Advantage Theory
R-A theory is a general theory of competition that describes a disequilibrium-provoking process
theory of competition, which addresses, innovation and organizational learning are endogenous;
information in a market is imperfect; and entrepreneurship, institutions, and public policy affect
economic performance (Hunt 2000; Hunt 1999; Hunt and Morgan 1995; and Hunt and Arnett
2004). Figure1 introduces overall and brief overview of R-A theory. The theory views markets
are never in equilibrium; that is, consumers demand in industries are not homogeneous and
static (Hunt and Morgan 1995). Overall, R-A theory suggests that a firms comparative

4
advantages in resources result in competitive positional advantages and then to superior financial
performance, and the whole competition process in markets are influenced by environmental
factors (e.g. public policy, suppliers, etc). In a certain market conditions and time period,
resources are considered comparatively advantageous, or neutralized, or comparatively
disadvantageous. Comparative advantages in resources exists when they are to be utilized to
produce market offerings that are superior in value and low is cost, comparing to competitors
(Hunt and Morgan 1995). This relative state of a firm in resources is learned by competition in a
market; say, relative financial performance signals a firms relative position in a market that, in
turn, does relative resources (Hunt and Morgan 1996)
There are ten fundamental premises in R-A theory that are clearly distinctive from neoclassical
theory; (1) heterogeneous consumers demands within industries, (2) imperfect and costly
consumer information, (3) constrained self-interest motivation, (4) superior financial
performance as a firms objective, (5) imperfect and costly firms information, (6) tangible and
intangible (high-order) resources, (7) heterogeneous and imperfectly mobile traits of resources,
(8) role of management (to recognize, understand, create, select, implement, and modify
strategies), (9) role of environment (influences on conduct and performance), and (10)
competition (comparative advantage).
According to Hunt and Morgan (1996), innovation plays a key role in R-A theory and is an
outcome from a competitive process in a market which is influenced by six environmental
factors of the theory (societal resources, societal institutions, competitors, consumers, suppliers,
and public policy); meaning that, a firm deems innovation a main source of response to a market
signal to sustain acquired advantages and / or neutralizes competitors advantages. R-A theory

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distinguish between proactive innovations and reactive innovation. Whereas, the former refers to
a type of innovation without specific competitive pressures, the latter indicates a type of
innovation prompted by competition (Hunt and Morgan 1996; Hunt 2000). Furthermore, they
noted that reactive and proactive innovation depends on higher-order complex resources.
(Figure1 and 2 comes about here.)
R-A theory categorizes into seven types (i.e. physical, financial, legal, human, informational,
relational, and organizational) which are the tangible and intangible, or the basic and the highorder which is socially complex and interconnected resource combination of tangible and
intangible resources (Hunt 2000). R-A theory explicates the long life span of comparative
advantages of resources with mobility, complexity, interconnectedness, mass efficiencies,
tactiness, and time compression diseconomies (Hunt and Morgan 1995; Hunt 2000). Moreover,
as mentioned, comparative advantages in resources are determined by interaction between
relative value produced by and cost of resources. Figure2 shows nine cells of market position
(i.e. competitive disadvantage, competitive advantage, or parity position) that are determined by
relative value created to competitors and relative cost level to competitors. Hunt (2000)
introduced some of sources of the cost reduction; (1) substituting of lower cost resources for
those of higher cost, (2) developing a new organizational competence, or (3) improving an
existing competence; and value enhancement; (1) being able to substitute a higher-quality for one
of lower quality, (2) outsourcing a key component to a supplier who has superior competence in
producing it, or (3) improving an existing, in-house competence for making a key component.
New Product Performance

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Successful new product performance (hereafter NPP) pertains to many factors such as sales
force, promotion, resources, and competitors activities. However, in this study, NPP is
determined by inter-firm related factors; (1) new product development process speed (NPD
speed), (2) quality, and (3) speed to market.
Speed of process: In this study, speed of process is an efficiency term and refers to how
efficiently a firm can implement process. Total process of new product development is not single
phase process as Griffin (1993) introduced in his article. Similarly, Droge, Jayaram, and Vickery
(2000) divided the total new product development process into two phases; (1) the pre-launch
phase (e.g. idea generation, technical assessment, etc) and (2) the production and market launch
phase (i.e. commercialization). Previous literatures have said commercialization phase cause
more costly, in terms of money and time, than other multiple phase models. So our study focuses
on the level of efficiency in firms new product development process, in light of
commercialization part of total process (i.e. efficiency in production and speed to market).
Speed to market: With various factors, timing to launch new product is a crucial factor to
improve the chances of success of new product (Benedetto 1999). Timing to launch refers to
when the launch is conducted from the point of view of the company, the competition, and the
customer However, whereas relatively superior speed to market strategy allows a firm to enjoy
being a market leader, having bigger market share, acquiring profits, it also causes higher costs
than other following competitors and higher risk of new product failure. Therefore, merely
saying be the first, do fast, and be on time cannot be ultimate rule of thumb for improving
chances of success of new product. Lambert and Slater (1999) argued that following those
principles does not necessarily make a firm to better off than being second or third or even later.

7
Accordingly, they suggest, in lieu of above three principles, that effective market introduction
timing, first to mindshare, and managed responsiveness should be strategic principles.
Quality: The last criterion is new product quality. Quality has referred to perceived superiority
or excellence in a product as compared with competing alternatives from the perspective of the
marketplace (Garvin 1988; Zeithaml 1988). As the definition says, quality is also relative term,
like the other two factors discussed above. However, relative extent of quality improvement of
new product can be defined by two different lenses. On the one hand, new product quality is to
be compared to competitors product. On the other hand, quality of new product improvement is
evaluated by established previous of inter-firm products. In our study, we only focus on the
lenses of inter-firm comparison.
Risk
Before defining what managerial risk perception is, we have to define its focus, risk. This is not
trivial, because, as Fishhoff, Watson and Hope (1984, p.124) say, the definition of risk, like
that of any other key term in policy issues, is inherently controversial. Since the risk people
experiment is essentially subjective, i.e., depends on how each person feels it, we can say that,
cognitively, there are as many risk definitions as there are people. But in fact, even when defined
formally, risk has many meanings. The classical definition of risk used in economics (Knight
1921), which separates risk as measurable (e.g., in assigned probabilities) and uncertainty as non
measurable, does not seem to reflect lay-peoples intuitive understanding of the term. Shorts
(1984) definition of risk as the likelihood that an individual will experience the effect of a
danger, or Rosas (as cited by Moen and Rundmo 2004, p.7) definition of risk as a situation or
an event where something of human value (including humans themselves) is at stake and where

8
the outcome is uncertain also does not seem to be the ones commonly used by people in their
daily lives.
The model developed here will use Sitkin and Pablos (1992) definition of decision risk as "the
extent to which there is uncertainty about whether potentially significant and/or disappointing
outcomes of decisions will be realized" (as cited by Sitkin and Weingart 1995). Since this
definition (a) is well cited1 among the social sciences in general (339 times) and management
related sciences in particular (268 times; 108 times in the last 5 years) and, (b) seems to converge
with the definition of risk used in the many works analyzed in this study, we decided to use it as
our risk construct.
Individual Risk Perception: The risk perception of a person, i.e., how she accesses frequency,
probability or uncertainty of events, is bounded both by internal factors her cognitive processes
(e.g., memory, intelligence, computational capacity) (Simon 1955), background characteristics
(e.g., age, education, socioeconomic roots) (Hambrick and Mason 1984), acquired knowledge
(e.g., specific information, dedicated information processing systems), and outcome history
(especially recent) (e.g., Sitkin and Weingart 1995) and by external factors like framing
effects (how the information is presented) (Kahneman and Tversky 1979), manner and frequency
that specific events appear in the media (Slovic et al 1982), and objective factors, (e.g., living in
a city that is more violent than the average, or near a shark infested beach) (Boholm 1998).
Culture, both corporate culture and national, also enter in the latter group.

1 The numbers presented here refers to the number of citations of Sitkin and Pablo, 1992 and
Sitkin and Weingart, 1995, since the later study is an extension of the former and uses the same
concepts of risk.

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Individual risk perception is an important variable in the definition of the managerial risk that
will influence the innovation process, maybe the most important, since innovation is a strategic
process lead by people and their individual characteristics are expected to play a key role
throughout the decision process. This way, we can expect that a high individual risk perception
by the part of each of the firm decision makers will have a negative effect in the firm
innovativeness.
Corporate Risk Perception: The second component of the managerial risk perception is the
corporate risk perception. Corporate culture is a uniquely human product that develops slowly
in the firms, is tacit and no easily defined and can be an elusive factor (Tellis, Prabhu and
Chandy 2009, p.7). Culture operates at a personal level, and parties culturally similar will have
more facility to deal with each other (Karunaratna, Johnson and Rao 2001). With a series of
positive trend that resulted in a growing world trade and the worldwide liberalization of capital
markets facilitated by the technological revolution of the 90s (Kumar and Russell 2002),
multinational corporations have been moving and setting roots in countries all over the world.
The cultural clash between the foreign corporate culture and the national culture where it is being
inserted can create uncomfortable situations, because local subsidiaries can confound the role of
parent firm and local culture (Tellis, Prabhu and Chandy 2009). Besides, evidences show that
multinationals corporations keep control of their subsidiaries corporate culture through
instruments like expatriate deployment and evaluation systems (Brock at al 2008). Because of
this, we expect to see a negative effect of the corporate risk perception over its decision makers
individual risk perception when the corporate risk perception is greater than the decision maker
risk perception, and a positive effect of the corporate risk perception over its decision makers
individual risk perception when the corporate risk perception is less than its decision makers

10
individual risk perception. Besides, we expect to see a negative effect of the corporate risk
perception on innovativeness.
Innovativeness
Innovation, i.e., "the development and implementation of new ideas" (Van de Ven 1986, p.490),
has been identified as a possible source of competitive advantage (Porter 1980; Calantone and Di
Benedetto 1988), and was also well established as one of the links between market orientation
and organizational performance (Han, Kim and Srivastava 1998).
The level of innovation output of a firm, compared to its competitors, is given both by its
innovativeness, i.e., the propensity of the firm to think, develop and introduce new ideas, and by
its ability to implement these new ideas successfully (Hurley and Hult 1998). Although both
characteristics can be linked to the market orientation of the firm, the connection of the latter one
seems to be clearer: The ability to implement innovations in the market will be directly
connected to the firm's organizational systems and interdepartmental dynamics, i.e., the
coordination between its departments regarding the best strategies to launch the innovation in the
market in order to maximize its profit maximization, in terms of advertisement, marketing,
logistics and financial strategies.
The link between innovativeness and market orientation is also sound, but its nuances make the
matter of defining the antecedents of innovativeness a little more complex. Like market
orientation itself, innovativeness is not something that you can buy or a system that can be
implemented in a short time frame, but part of the of the premises about the organizational
functioning shared by the firm's managers and employees - in other words, part of the

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organizational culture (Deshpand and Webster 1989). This way, we can say that although
market orientation and innovativeness share many of its antecedents, like market focus, tolerance
for conflict and risk, and the need for an effective department interconnectedness (Kohli and
Jaworski 1990; Hurley and Hult 1998), there is no direct connection between these two traits
within a firm. This way, it is possible to have a situation where the organization is market
oriented, but not innovative, or where the culture of innovativeness exists within the
organization, but this culture is not fully explored towards the improvement of organizational
performance because the firm lacks market orientation. The coexistence and gradation of both
characteristics will depend on several aspects internal and external to the firm, like its top
management teams, internal systems and environmental turbulence.
Between the organizational aspects that influence innovativeness, one of the most important
comes to be its top management social composition and background characteristics (Hambrick
and Mason 1984). This can be said because these characteristics are what form the managers'
weltanschauung, and, consequently, will also have a fundamental part in the definition of their
strategic choices (Bantel and Jackson 1989). In consequence, an organization with a management
team whose specific characteristics lead it to be risk averse and disregard continuous innovation
as important for the organization, in comparison to other priorities like short term financial return
or market share maintenance, will tend to adopt a reactive strategic posture, innovating only
when pushed by its adversaries to do so due to loss of competitiveness. On the other side,
organizations with managers whose characteristics foster in them the aptitude to see the nurturing
of innovation as a potential source of competitive advantage and the risk inherent to the
innovation process as justifiable, vis--vis the long term benefits brought by innovativeness, will

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be prone to adopt a proactive strategic posture, bringing to the market new products before its
competitors.
(Figure3 comes about here.)
HYPOTHESES DEVELOPMENT
Figure3 introduces a framework which shows antecedents of strategic stance of management
team (proactive or reactive) and its indirect relationship to profits through new product
performance (quality, speed to market, and speed of production process). The following
hypotheses are developed to understand those links or relations.
Characteristics of Management Team, Strategic Stance, and Environmental Turbulence
The innovativeness of the management team of a firm will have a direct effect on the degree of
development and implementation of new ideas evolved within it. According to Van de Ven
(1986), institutional leadership is critical in creating a cultural context that fosters innovation,
and in establishing organizational strategy, structure, and systems that facilitate innovation.
Tellis et al. (2009) also call attention to the importance of corporate culture on firm innovation,
and that one of the firm practices that may drive innovation is the empowerment of individuals
with resources to explore, research, and build on promising, but uncertain, future technologies
(p.8).
In Hunt and Morgan (1996) words, [i]n R-A theory, innovation plays a key role (p.109). The
theory distinguishes it between proactive innovation (i.e., innovation by firms in the absence of
specific competitive pressures) and reactive innovation (i.e., innovation directly prompted by

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competition). We can assume that innovative firms will be prone, by its own nature, to engage
more in proactive innovation than those firms that are not innovative. Furthermore, we can also
say that this tendency to innovate proactively will also make these firms be proactive in the
definition of their strategies, in order to create the best possible conditions to launch its new
products.
On the other side, situations of environmental turbulence can make even innovative firms
become less proactive, given a situation of uncertainty and unpredictability2. Nevertheless, it can
be reasonably assumed that, in a situation with dynamic and volatile conditions that result in a
high instability, those firms with more innovative cultures, for a matter of consistency, will
continue to be more proactive when defining their strategies than those firms with less innovative
cultures. In other words, we can hypothesize that:
Hypothesis1a: Environmental turbulence weakens the relationship between management
innovativeness and strategic posture.
Hypothesis1b: When the management team of a firm detects significant environmental
turbulence, the more innovative the management team is, the more probable it takes
proactive strategic stance.
Another factor that may affect the strategic proactivity of a firm is the risk perception of its
managers. Sitkin and Weingart (1995) found that risk perception, defined as an individual's
assessment of how risky a situation is in terms of probabilistic estimates of the degree of
2 Following Hanvanich et al. (2006) and Calantone et al. (2003), environmental turbulence is
defined as a situation with dynamic and volatile conditions that result in a high instability of key
organizational variables and sharp discontinuities in demand and growth rates, generating
uncertainty and unpredictability.

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situational uncertainty (p.1575), has a mediating effect in the risky decision making behavior
given a specific situation. Other studies also found that risk perception varies greatly from person
to person or group to group (Weber and Milliman 1997; Sitkin and Pablo 1992). People have
these variances on their risk perception because this is resulting from several personal and
environmental endogenous factors, like personal history, knowledge on the matter being
analyzed and different settings where they are inserted (Slovic, Fischhoff and Lichtenstein 1980).
Risk perception, however, may also be affected by exogenous factors. Williams, Zainuba and
Jackson (2008) multivariate analysis revealed that managers perceived greater risks when they
believed that there were higher amounts of outcome uncertainty. Environmental instability also
raises the perception of how risky an investment option is, and makes senior managers postpone
investment decisions (Sutcliffe 1994).
If we consider the endogenous and exogenous factors that influence risk perception together, and
also that risk perception has a mediating effect in the managerial risky decision making behavior
(Sitkin and Weingart 1995), we can conclude that managerial groups that have a low risk
perception will have the tendency to be more proactive when handling risky situations than those
groups with a relatively higher risk perception. Even if the overall risk perception is raised
because of some environmental instability being detected, we can hypothesize that the relative
difference between the proactiveness of groups with a lower risk perception and groups with
higher risk perception will remain constant, with the former still being more prone to be
proactive when dealing with situations of uncertainty and unpredictability. We can thus suppose
that:

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Hypothesis2a: Environmental turbulence strengthens the relationship between risk
perception and strategic posture.
Hypothesis2b: When a management team of firm detects significant environmental
turbulence, the smaller the risk perception of the management team, the more probable it
takes proactive strategic stance.
Comparative Advantage in Resources and Strategic Stance
Similar with Barneys four criteria of sustainability of competitive advantages in resources that
result in long-term profitability (value, rareness, imperfect imitability, and imperfect
substitutability), R-A theory manifests imperfect mobility, complexity, interconnectedness, mass
efficiencies, tacitness, and time compression diseconomies as sources of the long life span of
comparative advantages in resources (Hunt and Morgan 1995 and Hunt 2000). Furthermore, if
those characteristics of resources are successful in production and offer of market offerings that
are deem comparatively more valuable to competitors into target segments mind and if it is
combined with a firms ability to product market offerings with lower cost, a firm enables to
competitively advantageous position.
The link between innovation and performance of a firm has been studied (e.g. Hurley and Hult
1998 and Han et al 1998). Innovation associated factors are categorized into two factors that are
capacity to innovate and innovativeness. The formal factor is determined by two organizational
characteristics cultural characteristics (innovativeness), and structural and process characteristics
(e.g. firm size and resources, formalization, planning, etc) (Hurley and Hult 1998). They also
show direct effect of capacity of innovate on competitive advantage and performance of a firm.

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However, herein, we focus on the connection between the confidence of a firm in its resources
and its strategic attitude to innovation. And resources in R-A theory has broader scope ranging
from tangible to intangible / high order resources than mentioned market orientation literatures.
Then we argue the following, referring a firm who has proactive strategic stance as the positive
attitude toward production of new product even with absence of pressure from competition and
reactive strategic stance as the positive attitude toward production of new product only with
existence of pressure from competition, we argue as following.
Hypothesis3: if a firm has competitive advantages in resources, it is likely to take
proactive strategic stance.
Strategic Stance and New Product Performance
Purposes or goals would be different between a firm taking proactive strategic stance and a firm
taking reactive strategic stance, and each firms decision on new product performance (quality,
velocity of production process, and velocity to market) will be also different.
According to the first hypothesis a firm taking proactive strategic stance has comparative
advantage in resource. With exploitation of that advantage, purposes or goals of a firm taking
proactive strategic stance are being market leader (or market ruler); taking competitive
advantageous position in a market with superior value of its offerings; and taking high profit
margin. However, those of a firm taking reactive strategic stance are avoiding risk or mistakes of
a proactive firm; targeting bigger pool of market segments; and targeting high sales volume. It is
highly likely that this firm is to be positioned parity or competitively disadvantageously, partly
due to less ability in resources than that of a proactive firms.

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Hypothesis4a: the more strategically proactive a firm, the higher its probability to
respond to environmental turbulence with: (1) faster production process of a new product;
(2) higher quality of a new product, comparing to previous inter-firm products; and (3)
faster launch of a new product to a market.
Hypothesis4b: the more strategically reactive a firm is, the higher its probability to
respond to environmental turbulence with: (1) slower production process of a new
product; (2) more likely same quality of a new product, comparing to current competing
products; and (3) slower launch of a new product to a market.
Comparative Advantage in Resources and New Product Performance
Also with mediating effect of a firms strategic stance, we are also interested in direct influence
of comparative advantage in resource on new product performance. The argument is that even if
there is no certain strategic stance is taken by a firm, acquired comparative advantage from its
resource enable a firm to produce new product with efficient process and higher quality, and
launch a new product to the market with superior speed to competitors. That is, comparative
advantage in resource is reflection of firms capacity to be efficient and innovative.
Hypothesis5: if a firm has relative advantages in resources, it is likely to launch a new
product (1) with superior speed in production of a new product; (2) with higher quality
than previously established inter-firm products; and (3) with superior speed to a market.
New Product Performance and Profits

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Here, an ability to produce new product fast is efficiency term, meaning that a firm has capacity
to produce more value-added new product with up-to-date technology and low cost (in light of
time). It is obvious that higher quality of market offerings than previous version and than them of
market competitors. However, because both of highly efficient production process and high
quality links to high cost for a firm, we expect that, in lieu of short term profits, a firm would
enjoy long-term profits. On the other hand, slow launching of new product might have positive
influence on long-term profits, rather than fast launching. To expose customers to new product, a
firm might always try to make it available in market as soon as possible after adapting new
technology or reconfiguring offerings. However, one can think of two cases when fast response
cause negative influence on long term profit of a firm. The first is the case that customers are not
ready for accepting and adjusting to totally new product or concept or they might not deem it
necessary for replacing with old solutions they have had. The second case is that change or
development in new product is not recognizable in the view of customers, or that new product
causes large amount of cannibalization. Therefore, the argument is that relatively slow response
has stronger relationship with long term profit of a firm, due to lower risk of failure.
Hypothesis6: (1) the faster production process; (2) the higher quality; and (3) the slower
response to a market a firm behave with, the better long-term profits a firm will have.
Moderating Effects of Environmental Turbulence
Calantone, Garcia and Droge (2003) found that greater environmental turbulence (a) increases
the strength between innovativeness and new product development speed and, (b) increases the
strength of the relationship between innovativeness and corporate planning activities. R-A theory
predicts that those firms which are proactively innovative will generally gain competitive

19
advantage and achieve the objective of superior finance performance over their competitors
(Hunt and Morgan 1996) and several studies found a positive relation between innovativeness
and business performance (Marquis 1969; Calantone et al 2003; Tellis et al 2009). We assume
from these results that firms that engage in proactive strategic planning will have more options of
products to launch and a greater capacity to give a fast response to the market needs in the case
of environmental turbulence, in comparison to firms that engage in reactive strategic planning.
This will increase the chances of success of the products that the former launch and,
consequently, their financial performance/return in cases of market uncertainty and
unpredictability. We can say therefore, that:
Hypothesis7a: Environmental turbulence strengthens the relationship between proactive
strategic stance and new product performance.
Hypothesis7b: Environmental turbulence weakens the relationship between reactive
strategic stance and new product performance.
In any case, environmental turbulences will not be good for most firms in the short-term. Volatile
markets will oblige all firms to reconceptualize their strategies and redeploy their resources,
possibly generating losses due to their sub-optimal utilization. Nevertheless, because we assume
that proactive strategic firms are more innovative and, thus, will have more options of products
to launch and a greater capacity to give a fast response to the market needs in the case of
environmental turbulence, we hypothesize that on the long-term they will gain market-share
from those reactive firms that did not have any innovations ready to introduce in the market and,
therefore, were less prepared to give a fast response to the market needs. In other words, we
believe that:

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Hypothesis7c: Environmental turbulence has negative impact on short-term profitability
of both proactive and reactive strategic firms, but a positive impact on long-term
profitability of a proactive strategic firm.
METHOD
Data
Primary data on managerial innovativeness and risk perception will be obtained through selfadministered questionnaires sent to marketing and product development upper and middle
management representatives in companies manufacturing high technology consumer goods. The
high-tech consumer electronic industry was chosen due to its dynamic nature and fast speed of
product innovation and new product introduction (Schoonhoven and Eisenhardt 1990; Eisenhardt
and Tabrizi 1995). Secondary data on strategic posture, speed in new product development and
introduction, and new product performance, will be obtained through industry organizations and
research institutes.
Instruments
Innovativeness will be measure using a five item instrument based on the research of Miller and
Friesen (1982) and Hurley and Hult (1998). Risk perception will be measured using a 5 item
adaptation of the scale developed by Weber, Blais and Betz (2002) and risk attitude will be
measured using a five item adaptation of the choice dilemmas questionnaire developed by
Wallach and Kogan (1959, 1961). Perceived environmental turbulence will be measured using
the three item scale developed by Davis, Morris and Allen (1991). All other items
environmental turbulence, strategic posture, speeds in new product development and

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introduction, new product quality and new product performance will be obtained through direct
questioning on the surveys or through secondary industry data.
DISCUSSION
Implications
Firms, like people, have different ways to react to situations of discomfort and stress. In other
words, firms have unique personalities, reflected by the personalities, experiences and
relationships that exist within them (Barney, 1993). The relationship between the firms
resources and capabilities, and its personality, is a symbiosis derived from its particular history,
which generally guarantees that each firm has a personality that will make the better use of its
resources (Barney, 1991).
This harmonious association works well under recognizable and expected market conditions. Not
so under conditions of uncertainty and unpredictability (Calantone, Garcia and Droge 2003). In
situations like this, having a drill that indicates the steps to find the more appropriate solution can
save your live if you are a fireman or a soldier. It also can be very useful if you are a firm
surrounded by hostile competitors.
Business organizations call this drill strategy, and that is how they define the use they make of
their resources whether in breezy or stormy conditions. Our intention with this study was
twofold: First, define some of the antecedents that lead a firm to adopt a passive or an active
reaction, vis--vis its competitors. We expect to find a positive relationship between the upper
and middle management personal preferences for innovativeness, and the adoption of a proactive
strategy, and a negative relationship between the management body risk perception and the

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adoption of a proactive strategy. In other words, the more innovative and the less risk averse the
bosses are, the more proactive a firm will be in trying to create its own future whatever the
environmental conditions (Hambrick and Mason 1984; Finkelstein and Hambrick 1990). And the
inverse naturally holds: The more risks the managers perceive and the less innovative they are,
the more they will want the environment to settle to make a decision or at least, wait until the
environment forces them to make a decision.
This choice of a strategy is important in any environment, for sure, but less so in stable ones,
when time is more available either to make a decision or to hope the situation changes. In foul
conditions however, waiting or taking action makes all the difference, as does having a passive
or proactive strategy. Showing what this difference is is the second objective of this study. We
intend to show how the choice of proactively using the firms resources during turbulent times
influences the firm speed in new product development, new product quality, speed in new
product introduction, and new product performance, and to find if the differences resulting from
choosing a passive or a proactive strategy affect the companys return in the long term, or, in
other words, its sustainability.
In shorter terms, our work will show the link if it exists between an innovative and risk
accepting management and its long term competitive advantage and success, through the path of
management behavior strategy choice new product characteristics long term
profitability and sustainability.
Managerial Implications

23
It is clear that no work can change a person personality, and this one does not have this
pretension either. However, by identifying the paths through which a proactive strategy leads to
long term sustainability, we expect to raise the management any management awareness to
the gains brought by adopting a proactive stance. If they judge these gains to be relevant, even
non-innovative, risk averse managerial teams may choose, in times of stability, to adopt
strategies that allow them to make more and better choices in times of turbulence, reinforcing, is
this way, their firm strategic position and raising the chances of long time success.

24

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Figure 1. Resource-Advantage Theory Competition.

30

Figure 2. Competitive Position Matrix (Hunt and Morgan, 1995)

31

Figure3. Conceptual Framework

32

PROFITS
Management: Innovativeness

Management: Risk adverse

Resource Advantage

Reactive Strategic Posture

Tech Turb Mkt TurbCompet Intense

NP-Performance
*Speed
*Quality
33
*Speed
to Mkt