Dynamics of external fit and internal fit: case of electronics industry

Abstract

Purpose : The purpose of this paper is to reveal the strategic change-related issues by examining the dynamics between external fit and internal fit, as the success of strategic change is involved in the consideration of both internal and external fit. Design/methodology/approach : This paper uses regression analysis to analyze the panel data from the electronics companies in Taiwan’s stock market between 2004 and 2011. Findings : The empirical results show that there is a relationship between internal fit and external fit, and the momentum of internal fit was found as well. Moreover, the impact of the interaction effect of external and internal fit on performance is moderated by external fit. Originality/value : This research contributes to and extends the current research in both theoretical and practical ways. From a theoretical aspect, this paper considers internal fit and external fit simultaneously and has adopted the profile deviation approach to test their impacts on performance. From a practical aspect, the empirical results have derived implications for managers as to understand the dynamics such as trade-off, momentum and synergy between the two types of strategic fit, which may be helpful for making decision on strategy change.