(Strategic Group Membership and Performance Relationship: A Research in the Banking Industry)

Abstract

Purpose – The aim of the study is to examine strategic groups and to investigate the relationship between group membership and performance. Design/methodology/approach – The research has been conducted in the Turkish banking industry, covering the years 2006-2015. First, stable strategic time periods, which indicate the time periods banks are homogeneous in their strategic behaviour, are determined and the strategic groups in the industry are defined in each period, then according to four performance variables-ROA, ROE, profit per branch and profit per employee- performance of banks is measured and group membership-performance relationship is examined. Accordingly, cluster analysis is used to determine strategic groups, and one-way analysis of variance (ANOVA), Mann Whitney-U and Kruskal Wallis tests are used to test the hypotheses. All analysis are carried out with the SPSS package program and interpreted at a %95 confidence level. Findings – The findings reveal significant performance differences among strategic groups within the industry and also the banks within the same strategic group. However, differences between groups is significantly higher than differences within groups. Finally, change in group membership negatively affects the performance of banks. However, this result is not statistically significant. Discussion – Strategic group concept has brought a new level of analysis to the question “Why do some firms outperform others?” and become one of the most important descriptors of firm performance. Findings proves that strategic group membership affetcts firm performance. However, findings show that the propositions of industrial organization theory are acceptable in banking industry. In other words, strategic group membership is more effective than firm-specific factors in explaining performance differences between firms.