Impact on the Organizational Performance
of the Strategy–Technology
Policy Interaction
Abdul Rauf Parker
GENERAL COMMUNICATIONS ORGANISATION (G.T.O.)
This study explores the interaction between strategy and technology and
the impact of the interaction on organizational performance. The study
further attempted to explore the nature of the interaction as to whether
it was dynamic or a static one. Data were collected from 78 organizations
operating in the telecommunications industry. Results show that the nature
of the interaction between strategy and technology dimensions affects
organizational performance. J BUSN RES 2000. 47.55–64.  1999 Else-
vier Science Inc. All rights reserved.
T
echnology is the most fundamental of the core capabili-
ties of a firm. As such, technology is the central factor
in determining an organization’s strategy (Itami and
Numagami, 1992). Strategy, as it is used in this paper, means
the dynamic design of the activities of the organization.
How strategy and technology interact with each other is
the basic theme of this paper and what the author believes
to be one of the fundamental themes in strategy research.
The interaction between strategy and technology, despite its
importance, has not been well documented (Adler, 1989;
Capon and Glazer, 1987; Porter, 1985; Zahra and Covin,
1993). Therefore, there is very little statistical evidence on
whether the interaction between strategy and technology and
its impact on performance (Zahra and Covin, 1993; Itami and
Numagami, 1992) is dynamic or is not.
Whether strategy and technology interact dynamically with
each other and their relationship with organizational perfor-
mance is the theme of this paper. The study addresses three
research questions.
1. To what extent do technology dimensions interact with
strategy dimensions?
2. Is the interaction between strategy and technology a
dynamic one?
Address correspondence to Abdul Rauf Parker, Economic Strategies Expert,
P.O. Box 789, Row 1, PC789, Sultanate of Oman. E-Mail: arauf@gto.org.om
Journal of Business Research 47, 55–64 (2000)
 1999 Elsevier Science Inc. All rights reserved.
655 Avenue of the Americas, New York, NY 10010
3. What impact does the interaction between strategy and
technology have on organizational performance?
Literature Review
According to Porter (1983,1985), the deployment of techno-
logical resources is essential for achieving sustainable competi-
tive advantage and enhancing an organization’s financial per-
formance. The literature stresses the need for fit between
strategy and technology (Adler, 1989; Zahra and Covin, 1993).
As Miller (1988) has pointed out, research documenting the
relationship between strategy and technology has been slower
to develop, with very little effort made in integrating the
previous studies.
In most previous studies, technology has been treated as
a constraining factor that determines the strategy that an orga-
nization can follow (Itami and Numagami 1992). Itami and
Nunagami argue that the strategy that an organization wants
to pursue is constrained by the technology it has, or if the
organization wants to pursue a different strategy, it must
broaden its technological base (Hofer and Schendel, 1978;
Maidique and Patch, 1988; Porter, 1983). In this argument,
the relationship between strategy and technology is static and
unidirectional. That is, the causal arrow goes from technology
to strategy and not vice versa. However, when we think dy-
namically, three relationships are feasible:
1. between current strategy and current technology;
2. between current strategy and future technology; and
3. between future strategy and current technology.
In the first perspective, the interaction between strategy and
technology is a contemporaneous one. That is, an organization
tends to match its strategic options within its current techno-
logical limitations and capabilities. Itami and Numagami
(1992) argue that in this condition, technology can act either
as a weapon (Abell, 1980; Maidique and Patch, 1988; Porter,
1983) or a constrain to which an organization must adapt
ISSN 0148-2963/00/$–see front matter
PII S0148-2963(98)00051-4
56 J Busn Res
2000:47:55–64
(Hofer and Schendel, 1978); or a threat to be safeguarded
against (Anderson and Tushman, 1990).
This indicates that past studies have looked at the contem-
poraneous relationship between strategy and technology,
thereby ignoring the dynamic nature of the relationship. The
product portfolio that an organization has influences the kind
of technology that the organization tries to maintain or de-
velop. Thus, this affects the organization’s future technological
base, on which it bases its future strategy; that is, strategy
capitalizes on technology (Itami and Numagami, 1992; Porter,
1985; Anderson and Tushman, 1990).
In the second perspective, strategy leads to the develop-
ment of technology so that the firm can be competitive in
that business (Porter, 1983). Here technology development
can bring to the firm not only a set of competitive weapons, but
also a deeper technological base applicable in other business as
well (Itami and Numagami, 1992; Zahra and Covin, 1993).
Chandler (1962) has pointed out that resources accumulated
from past businesses become driving forces behind an organi-
zation’s diversification strategy. Prahalad and Hamel (1990)
indicated that the real sources of advantage are derived by
consolidating corporate-wide technologies and production
skills into core competencies rather than spawning unantici-
pated products. In this case, technology is extensible, and the
current strategy cultivates future technology.
The third perspective considers the effect of current tech-
nology on future strategy. Rosenberg (1976) has pointed out
that internal logic in technology works as a focusing device
that tends to determine the direction of new product develop-
ment. He argues that technology lets organizations recognize
which strategy they should follow. Itami and Numagami
(1992), on the other hand, stress that technology plays a more
active role driving the strategy cognitively, and they assert
that it sometimes becomes the main engine in the process.
Researchers such as Thompson (1967), Burgleman and Rosen-
bloom (1989), and Habermeier (1990) have postulated that
technology is a set of knowledge and beliefs and, as such, is
a system of logic.
This serves as the basis of cognition driving the strategy.
For example, when an organization has a deep commitment
to a particular technology, it first activates idea-generation
processes for strategy formulation. Second, it channels the
idea-generation process toward a common strategic direction
and focus. Third, technology makes it easier for acceptance
of the strategy. In this case, technology drives the cognition
of strategy (Burgleman and Rosenbloom, 1989; Jaikumar and
Bohn, 1986; Habermeier, 1990).
Previous studies on the interaction between strategy and
technology have been either unidimensional or multidimen-
sional. Studies by researchers such as Foster (1986), Ford
(1980), and Camillus (1984) have cataloged the important
dimensions of technology that fit a particular strategy. These
studies fail to consider dynamic interaction between strategy
A. R. Parker
and technology and the way in which this has an impact on
the organization’s performance.
Several researchers such as Maidique and Patch (1988) and
Zahra and Covin (1993) have proposed integrative models
that describe fit among various dimensions of technology
and business strategy. These studies have been influential in
providing an insight into the interface between strategy and
technology. However, empirical validations of these studies
have so far been minimal.
Some researchers, such as Hambrick, MacMillan, and Bar-
bosa (1983) have studied the empirical links between particu-
lar dimensions of technology and strategy. Miller’s (1988)
research findings indicate a need to determine the fit between
particular dimensions of strategy and technology.
Although these studies have increased our understanding
of the fit between strategy and technology, only a few studies
have examined the dynamic aspects and its impact on organi-
zational performance. Past research on the strategy–
technology interface suggests that:
1. The previous research has tended to be conceptual in
orientation.
2. There is growing recognition for multidimensional con-
ceptualization.
3. The impact on the organizational performance of the
interaction between strategy and technology has not
been well documented.
Thus, it is unclear from previous studies whether the inter-
action between strategy and technology is static or dynamic,
and what impact this has on an organization’s performance.
This study attempts to overcome some of the gaps in the
literature mentioned above by examining the interaction be-
tween strategy dimensions and technology dimensions and
their impact on organizational performance.
Strategy Dimensions
To examine the relationship between strategy and technology
it is necessary to identify the strategy and technology dimen-
sions. Three strategy dimensions directly related to technology
were examined: cost leadership, quality, and flexibility (Dean
and Susman, 1989). In this study, it was crucial to include
strategy dimensions the literature suggests would be influ-
enced by or influence technology and would be related to
performance outcomes (Reger, Duhaime, and Stimpert, 1992).
Cost Leadership
The concept of cost leadership has been popularized by Porter
(1980). According to Porter, an organization can gain a com-
petitive advantage by achieving the lowest cost structure in
the industry without neglecting other important areas, such
as service and quality. The technology approach associated
with this strategy involves long production runs with minimal
or no change in product design. Such strategy, as Dess and
Strategy–Technology Interaction
Davies (1980) have shown, is exemplified by pursuing econo-
mies of scale, achieving high capacity utilization, and competi-
tive pricing.
Previous research has shown that a low-cost strategy is
internally constrained (Dess and Davies, 1980; Miller, 1988).
Low-cost leadership has implications for technology choices
and, as such, this study joins other studies that have employed
this as a measure.
Quality
This refers to an organization’s intention to strive for industry
recognition based on product design and performance (Par-
thasarthy and Sethi, 1993). Quality is defined as the frequency
of product feature enhancements rather than product repli-
cability (Hayes and Wheelwright, 1984). Here, improvements
to design and performance of the product attributes is the
overriding concern.
Flexibility
This refers to an organization’s ability to compete in one or
more markets based on product/volume mix and product
innovation in a cost-effective manner (Buzzell and Gale, 1987).
According to Porter (1980) an organization pursuing such a
strategy attempts to maximize differentiation without jeopard-
izing cost. Two types of flexibility are defined and analyzed
in this study: scope, which involves competing on product
variety and volume flexibility; and speed, which involves the
rate of new product introductions and speed in innovation
(Dean and Susman, 1989).
Flexibility is a major variable in an organization’s set of
strategic choices. It influences the product mix, manufacturing
operations, and economics and, as such, has a close relation-
ship with technological decisions (Parasarthy and Sethi, 1993).
The three strategy dimensions outlined above are not ex-
haustive. Also, they do not fully reflect the breadth of strategy
construct as described by Venkatraman (1989). They are,
however, considered to be fundamental to strategy (Oster,
1990; Porter, 1980). These dimensions should be empirically
examined in order to get better understanding of the interac-
tion between strategy and technology.
Technology Dimensions
The literature provides wide array of technology dimensions
(Maidique and Patch, 1988; Porter, 1983; Rosenberg, 1976).
This research uses the definition of technology policy as de-
fined by Zahra and Covin (1993), that technology policy is a
set of organizational decisions concerning:
1. the technological posture;
2. process innovation; and
3. new product development.
J Busn Res 57
2000:47:55–64
Technological Posture
This dimension refers to an organization’s tendency to use
technology proactively (Oster, 1990). According to Adler
(1989), an organization that employs technology proactively
aspires to be on the leading edge of technological change in
the industry by building a reputation for being first in the
industry and being an industry leader in innovation.
Organizations may have diverse technological postures be-
cause of differences in technological know-how and differ-
ences in appreciation of the potential role of technology in
the organization’s operations (Foster, 1986). An aggressive
technological posture can signal specific competitive initiatives
and resource commitments by the organization (Porter, 1985).
Process Innovation
This dimension relates to the level automation in operational
areas, the adoption of the state-of-the-art technology and capi-
tal allocations for new equipment (Hayes and Wheelwright,
1984). According to Thurow (1987), automation and process
innovation are among the important decision with regard to
technology policy. Automation and process innovation deci-
sions cannot be made without considering the organization’s
sources of competitive advantage. For example, if a firm fol-
lows an aggressive technological posture, it must develop up-
to-date technological infrastructure that facilitates improved
productivity (Hills, 1989).
New Product Development
This dimension refers to an organization’s intensity in new
product development (Zahra, 1991). Cooper (1987) has
shown that organizations that pursue intensive new product
development activities tend to outperform their competitors
in the number and rate of new product introductions. As such,
the level of importance given to new product development is
an indication of the organization’s recognition that new prod-
ucts are a key factor in achieving business success.
Performance Dimensions
Although the interaction of strategy and technology will yield
benefits in internal efficiency, it will also reflect on the growth
and profitability of an organization (Parthasarthy and Sethi,
1993). This study has concentrated on the over-all indicators
of organizational performance; that is, differences in organiza-
tional performance will be attributable to the interaction be-
tween strategy and technology. Thus, for analyzing perfor-
mance growth sales and return on investment (ROI) were
chosen as the growth and profitability measures.
Research Design and Hypotheses
The preceding discussion suggests that the strategy and tech-
nology interaction should be examined on three levels: (1) to
58 J Busn Res
2000:47:55–64
understand how specific strategy dimensions interact with
technology dimensions; (2) to determine whether the interac-
tion between strategy and technology is static or dynamic; (3)
to examine the impact of the strategy–technology interaction
on organizational performance.
The telecommunications industry is an ideal setting in
which to test the strategy–technology interaction. The industry
is undergoing change that is driven by both strategy and
technology and, as such, provides a timely and important
industry to research.
Strategy–Technology Interaction
Cost Leadership
According to Porter (1980) firms that pursue a cost leadership
strategy seek to achieve competitive advantage through a low-
cost position. Firms that adopt an aggressive technological
posture try to achieve competitive advantage through techno-
logical prowess (Zahra and Covin, 1993). As such, both cost
leadership and aggressive technological posture reflect an or-
ganization’s desire to achieve a certain competitive position.
Research of Dess and Davies (1984) has shown that econo-
mies of scale can be successfully achieved through using inno-
vative process technology. Thus, a positive relationship is
predicted between cost leadership and process innovation.
Previous research has also shown that organizations pursuing
cost leadership strategies tend to have established product
lines rather than to introduce new models or brands (Dess
and Davies).
H1: Cost leadership dimension is positively associated with
aggressive technological posture and process innova-
tion, but is not positively associated with new product
development.
Quality
An organization’s promotion of brands and products and its
positioning in the marketplace are affected by the quality of
its products (Sheperd, 1985). Furthermore, quality programs
are often more readily sustained by an aggressive technological
posture (Geroski and Murfin, 1990). In addition, quality is a
major factor to consider in new product development (Hayes
and Wheelwright, 1984). It is difficult to envision a strong
association between process innovation, especially automa-
tion, and quality. An organization’s level of automation and
state-of-the-art technology seem to be poor predictors of qual-
ity (Meredith, 1987). It is hypothesized:
H2: The quality dimension is positively associated with
technological posture and new product development
and not significantly associated with the process inno-
vation dimension.
Flexibility
Organizations that emphasize product development are regu-
larly replacing their mature products with new products and
A. R. Parker
consequently are more flexible in managing their product
portfolio (Armour and Teece, 1980). It would, therefore, seem
that there is a positive association between an organization’s
flexibility and its emphasis on new product development.
The linkages between the flexibility strategic dimension
and the other technology dimensions are less clear. Flexibility
may not be strongly associated with process innovation. This
is because in a highly flexible organization, widespread stan-
dardization of advanced process technology may not be possi-
ble. Thus, organizations that need to be more flexible in meet-
ing customer requirements may not be the most likely users
of automated facilities and state-of-art technologies (Maidique
and Patch, 1988).
A similar scenario can be advanced with regard to the
potential association between flexibility and technological pos-
ture. For example, as the number of product lines or markets
increase, an organization may have to adopt a different techno-
logical posture for each of the different market conditions.
In some markets, it may require an aggressive technological
posture; whereas, in others, this may not be the case. Such
differences along different product and marker lines make
it difficult to predict an association between flexibility and
technology dimensions. These relationships should be exam-
ined so the following is hypothesized.
H3: Flexibility is positively associated with new product
development and not significantly associated with
technological posture and process innovation.
Organizational Performance
The technology dimensions vary in their ability to create com-
petitive advantage (Oster, 1990; Porter, 1983). According to
Porter (1985), certain technology policies may be most effec-
tive when linked to particular strategies. For example, the use
of advanced process technology may be strongly associated
with performance among organizations that have cost leader-
ship as a dimension of their strategy. It would seem appro-
priate to investigate empirically the performance-related con-
sequences of adopting a particular technology dimension
when pursuing a certain strategy. Zahra and Covin (1993)
pointed out that such a examination would be useful in identi-
fying appropriate technology dimensions that enhance organi-
zational performance within specific strategic contexts. It is
there hypothesized:
H4: The range of correlation between individual technol-
ogy dimensions and organizational performance will
vary significantly across organizations with different
strategy clusters.
Hypothesis 4 suggests that the nature of the interaction
between strategy dimensions and technology dimensions will
impact on organizational performance. If this is true, then
we would expect that the interaction between technology and
Strategy–Technology Interaction
strategy is a dynamic one. That is, there will be different patterns
of association between strategy and technology over time.
Thus, organizations that have a dynamic interaction be-
tween strategy and technology will achieve higher levels of
performance than organizations that have a static interaction
between strategy and technology. The set of technology di-
mensions that interact with strategy dimensions are detailed
in hypotheses 1 to 3. The following is hypothesized:
H5: The positive relationships predicted in hypotheses H1
to H3 will be more characteristic of dynamic inter-
active organizations as opposed to static interactive
organizations.
Methodology
The Sample
The sample consisted of organizations in the telecommunica-
tions industry. The telecommunications industry is one in
which organizations have actively adopted new technologies
(Council of Competitiveness, 1991). Two other issues needed
to be defined in the sample section:
1. size of the organization; and
2. individual in the sample to whom the questionnaire
would be addressed.
In regard to the size of the organization, it was decided to
survey medium to larger firms, because the hypotheses being
tested in this research could not apply to small organizations.
An employee strength of 5001 or more was defined as a
medium size, and over 10001 was regarded as a large organi-
zation (as per International Telecommunication Union [ITU]
definition). Regarding the second question, the nature of the
question sought decided the issue. It could only be provided
by those who had strategic responsibilities and who possessed
knowledge about the organization’s strategy as well as technol-
ogy. Managers such as Chief Executive Officers (CEOs) or
General Manager or Strategic / Corporate Planning Managers
were regarded in this group. Collecting data on technology
and strategy from such a level of managers is consistent with
previous research (Bracker and Pearson, 1986; Hall, 1992,
Zahra and Covin, 1993) The ITU 1995 Year book was used
for sample construction.
The sample thus generated contained 78 organizations, of
which 38 were in Europe, 13 in the U.S.A., 12 in Asia, 10 in
the Middle East, and 5 in Africa. Completed questionnaires
were received from 56 organizations. The effective response
rate was 71%. (This high response rate was achieved, because
the author had met most of the respondents and sought their
support for the research at a major telecommunications con-
ference prior to sending out the questionnaires).
A questionnaire was used for data collection. The use of
questionnaires to collect data on strategy and technology
choices is well documented in the strategy literature (Dess and
J Busn Res 59
2000:47:55–64
Davies, 1984; Hall, 1992; Venkatraman, 1989). Questionnaire
items were developed by borrowing them from previous re-
search (Dess and Davies, 1980; Govindarajan, 1988; Miller,
1988). Discussion with scholars, comments from managers,
and a pilot test provided additional clarity and relevance to
questionnaire items. Core questions used 7-point multi-item
rating scales. Questions were closed-ended to provide stricter
control of data collection and to facilitate validity in statistical
comparisons.
Measurements
Strategy Scales
Strategy was operationalized along three dimensions of cost
leadership, quality, and flexibility. The items were grouped
to create over-all indices following previous research (Dess and
Davies, 1984; Miller, 1988). In each case, the mean response to
scale was used as the organization’s score on that measure. A
firm’s score was derived by adding the responses for each
item of scale and then dividing by the number of items on
the scale.
Technology Scales
Technology policy was operationalized along the three dimen-
sions of technology posture, process innovation, and new
product development. In each case, the mean response to the
scale items was used as the firm’s score for that measure.
Organizational Performance Scale
Data were collected from secondary sources (company annual
reports where available, ITU year books). Where data were
unavailable from these sources, they were collected through
telephone calls to the organization. Two sets of performance
data were collected: Return on Investment (ROI) and Growth
in Sales (GOS). ROI and GOS are widely used as organizational
performance measures (Parthasarthy and Sethi, 1993).
Validation
To ensure the accuracy of the survey measures, the strategy
and technology measures were correlated with data from other
sources using two approaches. In the first, a second group of
high ranking executives, other than the respondents to the
mail survey, were contacted by telephone. Twenty-three exec-
utives collaborated in responding to items covering the strat-
egy and technology dimensions. Responses from these execu-
tives were then matched to those from their organization’s
mail respondent. The t-test was used to determine if there were
significant differences between the two sets of respondents. No
significant differences were found between the two groups
(p , 0.05).
The second approach in validating the measures involved
correlating survey measures and selected strategy and technol-
ogy dimensions. Focusing on strategy dimensions, data were
60 J Busn Res A. R. Parker
2000:47:55–64

available for 28 organizations on ISO 9,000 certification. This Table 1. Research Variables Summary Statistics
measure correlates positively with the survey-based index on Variables Mean SD Alpha
quality (r 5 0.65, p , 0.001). Data were also gathered from
the 23 executives mentioned above on “the number of changes Cost leadership 0.76 0.33 0.83
in the product line up over the past 3 years.” These figures Quality 20.76 0.35 0.77
correlated significantly with the flexibility measure (r 5 0.67, Flexibility 20.81 0.51 0.82
Technological posture 0.79 0.35 0.72
p , 0.001). Process innovation 0.98 0.67 0.63
Validation of the technology dimensions was also done New product development 0.65 0.33 0.56
in two steps. Following Zahra and Covin (1993), data were Return on investment (ROI) 1.02 0.52 —
collected on the R&D spend from secondary sources. Data Growth of sales (GOS) 0.99 0.67 —
were available for 60 organizations. Research by Scherer,
(1980) has shown that organizations tend to devote approxi-
mately 75% of their R&D to product development and the modified Fisher Z transformation statistic (Schmidt, Hunter,
remainder to process innovations. This was then correlated and Pearlman, 1981) was employed to determine if each tech-
with the survey-based measure of process innovation. The nology dimension’s correlation with performance was signifi-
two measures were significantly associated (r 5 0.69, p , cantly different for clusters of organizations with the most
0.001). Data were also gathered from the 23 executives men- positive and least positive coefficients.
tioned above on the number of new products introduced to The testing of H5 required that the sample be divided into
market in the past 3 years. These data significantly correlated dynamic- and static-interactive subgroups. This was accom-
with the survey-based measure of new product development plished by using moderated regression (Arnold, 1982), in
(r 5 0.61, p , 0.01). Over-all the above analyses validated which a positive beta indicated a dynamic relationship be-
the accuracy of the survey measures. tween strategy and technology; whereas, a negative beta indi-
cated a static relationship. Hypotheses 1 to 3 were then tested
within each subgroup.
Analytical Techniques
The testing of Hypotheses 1 to 3 required that a correlation
matrix of the strategy and technology dimensions be computed
Results
and evaluated for consistency with the hypotheses. Hypothesis Table 1 presents the summary statistics for the study’s vari-
4 required that organizations be grouped first according to ables. All scales have alpha coefficients between 0.56 -0.83,
similarities in their strategy patterns. Ward’s method of hierar- which suggests moderate to high reliability (Van de Ven and
chical cluster analysis was used for this purpose (Everitt, Ferry, 1980).
1974). Ward’s method minimizes intracluster differences and Table 2 displays the inter-correlation among the study’s
maximizes intercluster differences on the intercluster vari- variables. Correlation between the strategy and technology
ables, in this case, the three strategy dimensions. One-way dimensions range from -0.25 to 0.51. The wide range observed
analysis of variance (ANOVA) and contrast tests were then for these measures suggests that strategy and technology policy
used to determine whether the technology dimensions differed are distinct theoretical constructs. A diagnostic test was con-
across the resulting clusters. Hypothesis 4 implies that tech- ducted to explore the appropriateness of this conclusion fur-
nology dimensions will vary significantly in their correlation ther. The results showed that multicolinearity was not a serious
with organizational performance across organizations with problem in the present database, thus further supporting the
different strategy clusters. Accordingly as a test for H4, a distinctiveness of the strategy and technology scales.

Table 2. Intercorrelations
Variables
1 2 3 4 5 6 7 8

1. Cost leadership
2. Quality 0.36***
3. Flexibility 0.45*** 0.33***
4. Technological posture 20.28* 0.29*** 0.17**
5. Process innovation 0.37* 0.41** 0.36*** 20.17*
6. New product development 20.2 20.29* 0.45*** 0.21 0.42***
7. Return on investment (ROI) 0.41** 0.37*** 0.25* 20.36*** 0.46*** 0.16
8. Growth of sales (GOS) 0.35** 0.32** 0.33** 20.22* 0.31* 0.43** 0.29**

* p , 0.05; ** p , 0.01; *** p , 0.001.

Strategy–Technology Interaction J Busn Res 61
2000:47:55–64

Table 3. Means and Standard Deviations of the Strategy Dimensions in Each Cluster
Cluster Meansa SD
1 2 3 4
Dimension (n 5 26) (n 5 22) (n 5 18) (n 5 12) F Duncan Results*

Cost leadership 0.76 0.87 24.58 0.5 45.23** 3 , 1,2,4

0.29 0.36 0.55 0.21 1 , 2,4
Quality 20.67 0.98 0.04 0.65 22.74** 1 , 2,3,4
0.3 0.28 0.25 0.33 2 . 3,4
Flexibility 20.38 0.84 20.29 0.45 35.38** 1 . 2,3,4
0.25 0.4 0.4 0.15 4 . 1,2,3

a
Cluster labels: 1 5 narrow-focused, 2 5 high flexibility, 3 5 undifferentiated, 4 5 moderate.
*p , 0.05, **p , 0.001.

Hypotheses H1 through H3 predictable interaction between strategy and technology policy

Support for hypotheses H1 to H3 emerges from examining
the data in Table 2. Consistent with H1, the cost leadership
scale is positively associated with technology posture (p ,
0.001) and process innovation (p , 0.001). However, the
cost leadership scale is also positively associated with new
product development (p , 0.05). H2 is largely supported by
the data in Table 2. The results show that quality is signifi-
cantly correlated with technology posture (p , 0.001) and
new product development (p , 0.001) but is negatively corre-
lated with process innovation (p , 0.05).
H3 is partially supported by the data. The flexibility scale
is significantly and positively correlated with new product
development (p , 0.001) but not significantly associated with
process innovation (p , 0.05). However, contrary to expecta-
tions, flexibility is positively and significantly associated with
technology posture (p , 0.05). Over-all the data are consistent
with the theory behind the study’s hypotheses. In each case
where a positive correlation was predicted between strategy
and technology dimensions, it was found. In those cases where
significant correlation between two variables were not antici-
pated but were found; for example, in the case of flexibility
and technology posture, the magnitudes of these correlation
were relatively low. The results support the argument that a
exists.
Hypothesis H4
The testing of hypothesis H4 was done in two steps. The first
step involved the derivation of empirically valid clusters of
organizations with similar strategies. The second step involved
correlating the technology dimensions with performance
across the strategy clusters.
STEP 1: The results of the cluster analysis of the three strategy
dimensions suggest that a four-cluster solution best fits the
data. This conclusion is based on an examination of changes
in the squared Euclidean distance between various cluster
solutions. Table 3 presents the means and standard variations
of the strategy dimensions in each cluster. The one-way AN-
OVA F-ratios for each dimension are also displayed to verify
that there are overall intercluster differences. In addition Dun-
can’s range test was used to aid in interpreting cluster differ-
ences through pairwise comparisons of cluster means as sum-
marized in Table 3.
CLUSTER 1: NARROW FOCUSED (n 5 26) Organizations in this
cluster tend to rely on their existing range of products, having

Table 4. Means and Standard Deviations of the Technology Variables and Organizational Performance in Each Strategy Cluster
Cluster Meansa/SD
1 2 3 4
Technology Variables (n 5 26) (n 5 22) (n 5 18) (n 5 12) F Duncan Results

Technological posture 21.67 0.34 2.75 2.31 15.68** 1 , 2,3,4

0.53 0.45 0.55 0.27 2 , 3,4
Process innovation 0.67 0.45 22.25 0.65 10.57** 3 , 1,2,4
0.3 0.28 0.17 0.33 2 , 1,4
New product development 0.38 0.45 4.3 2.15 12.23** 1 , 2,3,4
0.23 0.4 0.29 0.66 3 , 2,4
Return on investment (ROI) 0.8 0.77 1.15 2.86 8.76** 2 , 1,3,4
0.36 0.24 0.27 0.51 1 , 3,4

a
Cluster labels: 1 5 Narrow-focused, 2 5 high flexibility, 3 5 undifferentiated, 4 5 moderate.
* p , 0.05, **p , 0.001.
62 J Busn Res A. R. Parker
2000:47:55–64

Table 5. Zero-Order Correlations Between Technology Variables Correlation between the three technology dimensions and
and ROI in Each Strategy Cluster ROI were also examined within each cluster (see Table 5).
Cluster Meansa/SD The technology posture dimension is positively associated
1 2 3 4 with Clusters 3 and 4, negatively associated with Cluster 1,
Technology Variables (n 5 26) (n 5 22) (n 5 18) (n 5 12) and not significantly associated with Cluster 2. For the process
innovation dimension, it is positively associated with ROI in
Technology posture 20.53* 0.18* 0.65* 0.73* three of the Clusters, except for Cluster 3, where it has a
Process innovation 0.67** 0.45** 20.62** 0.65* significant negative coefficient. Finally, the new product di-
New product
mension is positively associated with ROI in Clusters 3 and 4,
development 0.4* 0.2* 0.49** 0.58**
and not significantly associated with ROI in Clusters 1 and 2.
a
Cluster labels: 1 5 narrow-focused, 2 5 high flexibility, 3 5 undifferentiated, 4 5 Consistent with H4, for each technology dimension there
moderate. is a significant variation in its correlation with organizational
*p , 0.05, **p , 0.01.
performance across the strategy clusters (p , 0.05). The results
clearly suggest that each of the technology dimensions fit
introduced a few or no new products in the past 3 years. better with some strategies than others.
They tend to follow a cost leadership strategy in main and
score low on quality. Hypothesis H5
Table 6 shows the correlation between the technology dimen-
CLUSTER 2: HIGH FLEXIBILITY (n 5 22) Organizations in this
sions and the strategy dimensions within dynamic- and static-
cluster exhibit the highest scores on all three strategy variables.
interacting organizations. Consistent with hypothesis H5, the
Typically, these organizations have a strong emphasis on qual-
hypotheses H1 to H3 are more strongly associated with in the
ity and in introducing new products, but at the same time,
dynamic- than in the static-interacting subgroups. In seven
are focused toward efficient operations, as seen by their high
of the nine hypothesized relationships (78%), are supported
cost leadership score.
in the dynamic interacting subgroup. In addition, in seven of
CLUSTER 3: UNDIFFERENTIATED (n 5 18) Organizations in this the nine cases, there is a significant difference in the strength
cluster tend to exhibit low score on all three strategy dimen- of the individual correlation between dynamic- and static-
sions. They show low intensity toward quality and are less interacting subgroups (p , 0.05). These results supplement
flexible and pay little attention to costs. those relating to Hypothesis 5 in highlighting the strong per-
formance implications of achieving dynamic interaction be-
CLUSTER 4: MODERATE (n 5 12) The label given to this cluster
tween strategy and technology. Over-all the data support the
stems from the fact that compares to the other clusters, these
hypotheses relating to the correlation between technology and
organizations have median scores for all three of the strategy
strategy dimensions.
variables.
STEP 2: The second step in H4 required the use of ANOVA.
In this analysis, ROI was treated as the dependent variable
Discussion
and the strategic clusters as the independent variables. The A number of observations emerge from this study’s results.
ANOVA is significant (F 5 8.76, p , 0.001). Table 4 shows First, technology policy tends to align with strategy in compre-
that organizations in Cluster 1 have significantly lower ROI hensible and predictable manner. Not only were the strategy
than organizations in the other three clusters. Organizations dimensions correlated with the technology dimensions, but
in Cluster 2 have ROI significantly lower than organizations the multivariate strategic patterns were also associated with
in Clusters 3 and 4. Finally, organizations in Cluster 4 have technology dimensions. This findings suggest the interactive
the highest ROI score. These differences in ROI suggest that nature of the fit between strategy and technology.
owing to different foci, the strategic clusters achieved different Second, strategy moderates the relationship between tech-
levels of performance. nology and organizational performance. This conclusion fol-

Table 6. Correlation of Strategy and Technology Dimensions with Dynamic- and Static-Interacting Organizations
Technological Posture Process Innovation New Product Development
Dynamic Static Dynamic Static Dynamic Static

Cost leadership 0.78*** 0.03 0.58*** 0.13 0.61*** 20.11*

Quality 0.38 0.01** 0.44 20.23* 0.5*** 0.18
Flexibility 0.62*** 20.18* 0.22 0.01* 0.48*** 20.37**

*p , 0.05; **p , 0.01; ***p , 0.001.

Strategy–Technology Interaction
lows from the finding that the relationships between technol-
ogy and performance varies across organizations with different
strategy configurations (H5). As such, consistent with the
premise of this research, technology policy’s fit with strategy
is a significant predictor or organizational performance. This
suggests a need to align strategy and technology choices as a
precondition to superior performance.
A third observation from this study is that there seems
to be a relationship between dynamic strategy–technology
interaction and organization performance. Organizations that
exhibited dynamic interaction tended to perform better than
those where interaction between strategy and technology was
static (H5).
Limitations
The research was based on telecommunications organizations
and, as such, limits the extend to which the results can be
generalized. Furthermore, the sample size of 78 is compara-
tively small, and this again limits the study’s generalizability.
Flexibility and quality as discussed in today’s management
literature are still fuzzy concepts. Methodologies for defining
and measuring them are not yet well developed. Methods
used in this research to measure dynamic and static interaction
between strategy and technology are exploratory in nature.
Consequently, caution must be exercised while attempting to
interpret the results.
Future Research Directions
The study has addressed several important questions concern-
ing the interaction between strategy and technology policy.
There are, however, several possibilities for future empirical
research on the ways in which strategy and technology inter-
act. Future studies should examine the nature of the dynamic
interaction between strategy and technology. Also, future stud-
ies should try to develop methods for measuring the dynamics
of the strategy–technology interface. Future studies should
also examine other technology dimension, such as R&D activ-
ity and level of automation. This will increase our understand-
ing of the interaction between strategy and technology and
its impact on organization performance.
Another potential focus for future studies is to study the
impact of the interaction between strategy and technology
longitudinally. A longitudinal research is more appropriate
the study the dynamical aspects of the interaction between
strategy and technology.
I would thank the management of Q-Tel, in particular the former General
Manager, Mr. Izzat Al-Rashid, for the support and assistance given to me in
conducting and publishing this research. I also thank Bob Phelps for his
comments that contributed toward improving the paper.
J Busn Res 63
2000:47:55–64
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