STRATEGY AND ENVIRONMENT AS DETERMINANTS OF PERFORMANCE - EVIDENCE FROM THE JAPANESE MACHINE-TOOL INDUSTRY

This study examines the roles played by the environment and realized s trategies on firm-level performance in the Japanese machine tool indus try. We examine the effect of environment and strategy on performance using longitudinal data on a sample of 25 Japanese machine tool firms over the period 1979-92. Our results indicate that both firm strategie s and the environment play significant roles in influencing profitabil ity and growth. More specifically, whereas both strategy and environme ntal variables are significantly related to firm profitability, only e nvironmental variables are associated with firm growth. Additionally, in contrast to U.S.-based studies, we find that capital expenditures a nd technological change are not negatively associated with profitabili ty. Rather technological change has a positive impact on firm growth. We discuss the implications of these results for strategic management and provide suggestions for future research.