Competitive Strategies: Pure versus Hybrid

The start of the strategic purity discourse (Porter 1980) to the emergence of new idea of hybridization: In a review of the competitive strategies literature, Salavou (2015) outlined the history of the idea of strategic purity and the emergence of the related idea of hybrid strategies moving the focus from corporate and functional levels to the business unit level. The conceptualization is based on the vertical axis representing the market scope and the horizontal axis with the source of competitive advantage (cost or differentiation). Per Porter (1980, 1985), the performance impact of strategic purity is present but not combined or hybrid strategies. He called them stuck-in-the-middle. However, my conceptualization, as stated in section 1.5 suggests that when both dimensions of cost and differentiation are the sample means or above they are called the hybrid. Porter (1980) suggested that when these values were at average or below then they are called stuck-in-the-middle.

Nevertheless, the latest studies, for example, Salavou (2015), hybrid (cost plus differentiation) is possible and even plausible. The review by Salavou (2015) groups contributions on strategic purity (e.g., McNamee & McHugh 1989; Kim &

Lim 1988). Nevertheless, the possibility of hybrid strategies is possible since strategic purity might make a firm less responsive to market changes; it may, for instance, be in less active in developing new products, and fail due to competitor imitating and out-competing their strategic moves, less active on new product development, and fall into competitor imitating out their strategic moves. The emergence of hybridization was documented, for example, by Salavou (2015).

Therefore, in my research, I explore the impact of all three strategies: cost, differentiation, and hybrid. It is very important to understand the difference between the concepts of hybrid and stuck-in-the-middle. Hybrid emphasizes

competitive behavior that emphasizes more than one generic strategy, and

“stuck-in-the-middle” refers to an average emphasis on all generic strategies.

Following the latest review article, current exploration of competitive strategies is based on Salavou (2015). As outlined briefly above, the review article challenges the conceptual issues of hybrid strategies anchored on the original concept (Porter 1980). Going in depth into the history and coming with a revised idea of hybridization, the review article is comprehensive in nature. It also captures the literature beyond 2000 when there was a meta-analysis of the competitive strategies with a focus on the issue of the existence of strategic choices beyond three single-emphasis strategies. Salavou (2015) presents a critique on whether Thornhill and White (2007) have the right research question. The research question then was, “Does strategic purity pay?” Now the research question should be which strategies to pursue, pure or hybrid? My goal in this research is to focus on the latter approach as a unique contribution.

The literature on competitive strategies has been divided into strategic purity, as coined by Porter (1980) and hybrid strategies, validated later by authors such as Spanos, Zaralis & Lioukas (2004), in contrast to the stuck-in-the-middle proposition of Porter (1980). Salavou (2015:86) summarizes the existing literature on strategic purity and hybrid strategies. The following path in chronological order has been observed. There are multiple authors (Beal 2000;

Gopalakrishna & Subramanian 2001; Spanos et al. 2004; Acquaah & Yasai-Ardekani 2008; Pertusa-Ortega, Molina-Azorín & Claver-Cortés 2009; Salavou 2013) who studied all three types of strategies (cost, differentiation, and hybrid).

But studying these in the internationalization context and together with OA is rare in the existing literature.

Therefore, it is a plausible approach to study all the three types of strategies simultaneously in the presence of the DoI and OA. The strategic purity model

"creates strategic options based on theory, gives a model comprising three pure strategies at the business level, offers "black or white" strategic options, defends a taxonomical approach, and fits sectorial analysis" Salavou (2015:89). The revised idea of hybridization has the following characteristics. The model

“creates strategic options based on facts, suggests many hybrid strategies at the business level, offers "gray shades" strategic options, defends a dimensional approach, and fits either to sectorial or multisectoral analysis" Salavou (2015:89). Thus, my thesis aims to understand which type of strategies are relevant while internationalizing and while pursuing OA as a dynamic capability.

Firms can pursue either a pure (cost or differentiation) or a hybrid (cost plus differentiation) strategy (Porter 1980). Porter's strategic purity has been

researched well and he coined the word stuck in the middle for the hybrid type of strategies. Therefore, since current research scope follows two main streams of literature—IB and strategic management, I use both pure and hybrid strategies as contingency variables. Table 7 lists publications of the two schools of thought in competitive strategies. Since Porter's (1980) competitive advantage for sustainable performance has been the focus of many researchers, one school of thought argues purely for strategic purity (cost or differentiation) (Kim & Lim 1988; Thornhill & White 2007; Jácome, Lisboa & Yasin, 2002; McNamee &

McHugh 1989). The other school of thought, where hybrid (cost and differentiation) strategies have been realized, also has numerous contributions (e.g. Hill 1988; Acquaah & Yasai-Ardekani 2008; Pertusa-Ortega et al. 2009).

In an elaborated example paper, on a Greek manufacturing sample, it was found that hybrid strategies perform better than pure ones, and industry-level effects measured as an industry entry barrier had an impact on performance (Spanos et al. 2004). Nevertheless, firm-specific factors outweigh the industry effects by more than twice on the profit variability. The authors used measures that measure realized strategies rather than strategic intentions. Their measure of low-cost strategy is employee productivity measured as value added per employee (higher meaning low cost). On the differentiation strategy, marketing differentiation is measured as advertising intensity, while technology differentiation is measured as technology intensity (investment in new equipment to sales). On the choice of a measure of the outcome variable, it is the return on invested capital that measures the true nature of competitiveness in a globalized world (Snowdon & Stonehouse 2006). Very interesting findings in a longitudinal study done during 2007—2009 on sustainable performance even during the financial crisis show that intangible strategic resources represented by innovation capability and stakeholder relations are important (Flammer &

Ioannou 2015).

This stream of literature documents multiple operationalization of hybrid strategies and the study by Spanos et al. (2004) was one of the pioneering studies on this front. For this thesis, I have used the operationalization where both cost and differentiation strategies have above-the -mean value. An exemplar study was done by Thornhill and White (2007) on the strategic purity thought. As shown in table 7, there are many authors who supported this school of thought but the current exploration is the realization of hybrid strategies in contrast to the stuck-in-the-middle hypothesis of Porter (1980).

Table 7. Literature Review of Pure Vs Hybrid Strategies

Strategic purity (cost or differentiation)

Kim and Lim (1988); Thornhill and White (2007); Jácome, Lisboa and Yasin (2002); McNamee and McHugh (1989); Manev, Manolova, Harkins and Gyoshev (2015)

Hybrid (cost and differentiation)

Hill (1988); Campbell-Hunt (2000); Spanos and Lioukas (2001); Spanos et al. (2004); Kim, Nam and Stimpert (2004); Acquaah and Yasai-Ardekani (2008); Pertusa-Ortega, Molina-Azorín and Claver-Cortés (2009); Salavou and Halikias (2009); Hughes, Martin, Morgan and Robson (2010); Salavou (2013); Salavou (2015);