Strategic Groups: Comparing Cognitive and Objective Approaches

Strategic Groups: Comparing Cognitive and Objective Approaches

By Bruce H. Clark, David Bruce Montgomery
1996Working Paper No. 1387

This research compares two different approaches to identifying strategic groups, a cognitive approach, which reflects the perceptions of managers competing in the industry, an an objective approach, which reflects objective product-market characteristics. While there has been much recent research suggesting that managerial cognitions will differ from economic "facts: in a market, simulation gaem. We compare groups identified by these approaches, and then use these groups to predict competitive actions and firm performance. The data suggest marginal agreement between cognitive and objective groups at best. We find no systematic differences between cognitive and objective groups in predicting action or performance, but instead discover that relatively simple grouping procedures do better at predicting action, while relatively complex grouping procedures do better at predicting performance.