To be different, or to be the same? It's a question (and theory) of strategic balance

This paper addresses the performance consequences of firm-level strategic s imilarity. Past research observed that firms face pressures to be different and to be the same. By differentiating, firms reduce competition. By confo rming, firms demonstrate their legitimacy. Both reduced competition and leg itimacy improve performance. This paper begins building a theory of strateg ic balance by synthesizing the differentiation and conformity perspectives. The theory directs attention to intermediate levels of strategic similarit y where firms balance the pressures of competition and legitimation. Empiri cal support for the theory is found in a longitudinal study of commercial b anks. Several suggestions for developing a theory of strategic balance conc lude the paper. The theory's major implication is that firms should be as d ifferent as legitimately possible. Copyright (C) 1999 John Wiley & Sons, Lt d.