^ Academy of Management Revi0w. 1989, Vol. 14, No. 3, 423-444.

The Concept of Fit in Strategy Research:

Toward Verbal and
Statistical Correspondence
N. VENKATRAMAN
Massachusetts Institute of Teclinology
This article develops a conceptual framework and identifies six per-
spectives of fit—fit as moderation, fit as mediation, fit as matching, fit
as gestalts, fit as profile deviation, and fit as covariation—each im-
plying distinct theoretical meanings and requiring the use of specific
analytical schemes. These six perspectives highlight the isomorphic
nature of the correspondence hetween a particular concept and its
subsequent testing scheme(s), but it appears that researchers have
used these perspectives interchangeably, often invoking one per-
spective in the theoretical discussion while employing another in the
empirical research. Because such research practices weaken the crit-
ical link between theory development and theory testing, this article
argues for explicit links between theoretical propositions and opera-
tional tests.

The concept of fit has serveci as an important
building block for theory construction in several
areas of research (Aldrich, 1979; Fry & Smith,
1987; Thompson, 1967; Van de Ven & Drazin,
1985), including strategic management (Miles &
Snow, 1978; Snow & Miles, 1983; Venkatraman
& Camillus, 1984). However, a major problem is
the lack of corresponding schemes by which fit
has been tested. Although it is common for the-
orists to postulate relationships using phrases
and words such as matched with, contingent
upon, consistent with, fit, congruence, and
coalignment, precise guidelines for translating
these verbal statements to the analytical level
are seldom provided. Consequently, research-
ers choose an available or convenient mathe-
matical form and perform statistical tests without
examining the validity of their choice (cf. Drazin
& Van de Ven, 1985; Schoonhoven, 1981, for ex-
ceptions).
A lack of correspondence between the con-
cept and its mathematical formulation weakens
the link between theory building and theory test-
ing (Blalock, 1965), which may be a major rea-
son for inconsistent research results. Indeed,
Galbraith and Nathanson's observation, made
a decade ago, is equally valid today: "Although
the concept of fit is a useful one, it lacks the
precise definition needed to test and recognize
whether an organization has it or not" (1979, p.
266). In a similar tone. Van de Ven has argued
that inadequate attention to specifying the form
of fit could fundamentally alter the meaning of
the theory itself (Van de Ven, 1979; Van de Ven &
Drazin, 1985).
This paper has been developed along the fol-
lowing premises: (a) fit is central to both theoret-
ical discussions and empirical research in stra-
tegic management; (b) the role of fit in strategy
research has been severely handicapped by the

423
absence of appropriate links between the con-
cept (verbalizing fit-based relationships) and
theory testing (statistical testing of such relation-
ships); and (c) although the operationalization of
fit has been discussed generally (e.g., Drazin &
Van de Ven, 1985; Joyce, Slocum, & Von Glinow,
1982; Miller, 1982; Schoonhoven, 1981), this re-
search has not addressed strategy research in
particular or the many testing issues that are
central to linking concepts with empirical tests.
Alternative Perspectives of Fit
in Strategic Management
A Classificatory Framework
When most researchers decide to use a spe-
cific concept of fit, they are faced with two fun-
damental decisions. The first is to choose the de-
gree of specificity of the theoretical relation-
ship(s), which indicates the level of precision in
the functional form of fit. In some cases, a
precise functional form of the relationship be-
tween the underlying variables can be speci-
fied, but in other cases, certain variables are
said to fit together, without describing a precise
form. Typically, when two variables are in-
volved, it is possible to be more precise. For ex-
ample, Gupta and Govindarajan (1984) speci-
fied the fit between two variables—strategy and
a managerial characteristic—in terms of inter-
active effects, whereas Miller and Friesen (1984)
explored the differing patterns of configurations
among a larger set of variables between suc-
cessful and unsuccessful groups of firms.
The second decision is either to anchor the
concept (and tests) of fit to a particular criterion
(e.g., effectiveness) or to adopt a criterion-free
specification. In some settings, researchers
specify fit that is intrinsically connected to spe-
cific criterion variables, but in other settings they
adopt a criterion-free specification, which has
universal applicability.
These dimensions of specificity and anchoring
are best applied to strategic management by
424
employing them to identify six distinct perspec-
tives of fit. Figure 1, a conceptual framework,
uses these two dimensions to map fit as (a) mod-
eration, (b) mediation, (c) matching, (d) gestalts,
(e) profile deviation, and (f) covariation. In the
following section, each of these perspectives is
discussed independently regarding the central
issue of concepts and testing, and subsequently,
a set of issues pertaining to theory construction
is discussed to develop implications for future
research.
Fit as Moderation
Conceptualization. Because investigators
have followed the general axiom that no strat-
egy is universally superior, irrespective of the
environmental or organizational context, they
have commonly used a contingency perspective
(Harrigan, 1983; Hofer, 1976; Ginsberg & Venka-
traman, 1985) that has been operationalized
within a moderation (interaction) perspective.
As noted by Schoonhoven: "When contingency
theorists assert that there is a relationship be-
tween two variables . . . which predicts a third
variable, , . , they are stating that an interacfion
exists between the first two variables" (1981, p.
351, emphasis added), thus highlighting the
popularity of the moderation perspective in or-
ganizational research.
According to the moderation perspective, the
impact that a predictor variable has on a crite-
rion variable is dependent on the level of a third
variable, termed here as the moderator. The fit
between the predictor and the moderator is the
primary determinant of the criterion variable.
Researchers invoke this perspective when the
underlying theory specifies that the impact of the
predictor (e.g., strategy) varies across the differ-
ent levels of the moderator (e.g., environments).
In more general terms, a moderator can be
viewed categorically (types of environment,
stages of product life cycle, organizational
types) or characteristically (degree of business-
relatedness, degree of competitive intensity),
and it will affect the direction or the strength of
 LOW MANY
Fit as Profile Deviation Fit as Gestalts
(V) (IV)

CO

3 c
a o D O
"M

all Fit as Mediation Fit as Covariation II

(II) (VI) O 0)
Q) • S
(D - ^ O

PI ii

Fit as Moderation Fit as Matching

(I) (ID)
HIGH FEW
Criterion-specific Criterion-free

Choice of anchoring the specification

of fit-based relationships
Figure 1. A classificatory framework for mapping the six perspectives of fit in strategy research.

the relation between a predictor variable (e.g,,
strategy) and a dependent variable (e.g., per-
formance). In a formal representation Z is a
moderator if the relationship between two (or
more) variables, say X and Y, is a function of the
level of Z. The following is a mathematical rep-
resentation:
y = fix, z, X • z)
where Y — performance, X = strategy, and Z =
the contextual variable that fits with strategy for
performance improvement; here X • Z reflects
the joint effect of X and Z.
At this stage, positioning this perspective
within the classificatory framework (Figure 1) is
more easily understood because it is clear that
this perspective derives its meaning through its
anchor with a particular criterion, Y. Further, as
is apparent later through a discussion of the an-
alytical issues, the theoretical meaning of fit is
best understood when only two variables are
involved. Figure 2 is a schematic representation
of this perspective.
Analytical Issues. Analytical issues are dis-
cussed here and in the following sections to
highlight the underlying link between conceptu-
alization and testing, and although they are
(1)
X {e.g.. Strategy)
Z (e.g., Context) (Performance)
X • Z (Interaction)
Figure 2. A schematic representation of fit as
moderation.

425
 termed analytical issues, they are best viewed
as issues that link the conceptual and statistical
domains. For the moderation perspective, four
issues deserve particular attention: (a) the dis-
tinction between form and strength of modera-
tion, (b) the role and impact of multicoUinearity,
(c) the comparison of main versus interaction ef-
fects, and (d) the requirement of partialling out
quadratic effects for testing the moderating ef-
fects.
The distinction between the form and the
strength of moderation (Arnold, 1982) illustrates
both theoretical and analytical issues. If a re-
searcher, using the moderation perspective, hy-
pothesizes that the predictive ability of certain
strategies differs across different environments,
this hypothesis reflects the strength of modera-
tion and can be tested using subgroup analysis.
Conversely, if a researcher specifies that the
performance outcome is jointly determined by
the interaction of the predictor and the modera-
tor, then this hypothesis reflects the form of mod-
eration and can be tested using moderated re-
gression analysis (Arnold, 1982; Sharma, Du-
rand, & Gur-Ane, 1981). Thus, even when using
the moderation perspective of fit, the investiga-
tor must be more precise in developing the theo-
retical position.
The researcher addresses the strength of mod-
eration by using subgroup analysis which typi-
cally splits the sample into groups based on the
contextual variable (Z). (In some cases, it may be
more appropriate to split the sample on the basis
of X to evaluate the moderating role of X on the
relationship between Z and y. In either case, the
analytical issues are the same, although the
theoretical meanings could differ.) The hypoth-
esis of fit as reflected in the strength of modera-
tion is supported when statistically significant
differences exist in the value of correlation coef-
ficients between strategy and performance
across the environmental groups. (For two
groups, the difference in the correlation coeffi-
cients can be tested as a f-statistic [Bruning &
Kintz, 1987, pp. 226-228], but for multiple
groups, the difference is tested as a chi-squared
426
statistic [Arnold, 1982, p. 152].) Investigators also
use complementary moderated regression anal-
ysis (MRA) to test the form of moderation, and it
is more commonly used in strategic manage-
ment research (e.g., Gupta & Govindarajan,
1984, 1986; Hitt, Ireland, & Palia, 1982; Hitt, Ire-
land, & Stadter, 1982; Prescott, 1986). MRA can
be represented by the following set of equations:
Y = QQ + a^X + ajZ + e (2)
Y = ao + a^X + a^ -h agX • Z + e (3)
The moderation hypothesis is supported if the
unstandardized coefficient, a-^,, differs signifi-
cantly from zero, attesting to the effects of fit be-
tween X and Z on performance, Y.
Because a particular data set may support
one effect and not the other (Arnold, 1982), it is
critical that researchers articulate their concep-
tualization of moderation and justify their choice
of analytical technique (subgroup analysis vs
MRA) to ensure correspondence between their
theory and their tests. Recognizing this distinc-
tion, Prescott (1986) evaluated the nature of the
moderating role of the environment and con-
cluded that environments moderate the
strength, but not the form of the strategy-
performance relationship, which implies that it
is no longer adequate for researchers to theorize
a general form of fit-based relationship and to
treat MFiA and subgroup analysis as substitut-
able for testing the proposition.
The second issue pertains to the role and im-
pact of multicoUinearity, a statistical problem
that arises when correlations between indepen-
dent variables are extremely high, producing
large standard errors of regression coefficients
and unstable coefficients. This is relevant for es-
timating equation (3) because the cross-product
term, X • Z, is likely to be strongly correlated
with X and Z. This issue is important because
some researchers explicitly invoke multicoUin-
earity as a reason for not testing fit within this
perspective (cf. Dewar & Werbel, 1979; Drazin h
Van de Ven, 1985).
Although statistical estimation problems are
posed by multicoUinearity, it is not problematic
for establishing the existence of moderation ef-
fects. For interval-level measurements, a simple
transformation of the scale of origin reduces the
level of correlation between the cross-product
term, X • Z, and the original variables (X, Z).
(Southwood, 1978; p. 1198, demonstrated that
any equation [X^, X2, X^ — X^ • X^] can be trans-
formed into one [X[. X'^, X'3 = X[ • X^] where X\
= [Xi + c] and X'2 = [X2 + k], that is, the two
equations express the same surface in the three
dimensions [Y, Xj, X^], except for a shift in the
axes of X. However, if the variables are mea-
sured using ratio scales, such a transformation
alters the meanings of the measures and cannot
be so applied.) Such a transformation does not
affect the test for the unstandardized coefficient
03, although it affects the tests for both unstan-
dardized coefficients, a^ and a2, and all stan-
dardized coefficients (cf. Southwood, 1978, pp.
1166-1167; 1199-1201). Thus, contrary to some
investigators' beliefs in rejecting MRA for testing
fit due to multicoUinearity problems (Dewar &
Werbel, 1979; Drazin & Van de Ven, 1985), it is a
valid analytical method for testing fit as moder-
ation (Allison, 1977; Arnold & Evans, 1979),
which implies that if researchers conceptualize
their theories within the moderation perspec-
tive, they should not dismiss MRA for multicol-
linearity reasons without evaluating this impor-
tant property for interval-level measurement.
The third issue pertains to comparing main
versus interaction effects within the moderation
perspective. For example, a researcher may be
interested in both the effects of a chosen busi-
ness-unit strategy on performance and the ef-
fects of the fit between strategy and administra-
tive characteristics, such as structure (Chandler,
1962), systems (Lorange & Vancil, 1978), or man-
agerial traits (Gupta, 1984). Such concepts in-
clude the joint assessment of main and interac-
tion effects, which cannot be accomplished at
an interval-level of measurement. As discussed
previously, testing for a3 = 0 cannot be accom-
plished along with tests for a^ and 02 because of
the arbitrary scale of origin for interval-level
measurement. Thus, by using a typical MRA,
427
the researchers can test for the existence of in-
teraction effects but cannot compare the relative
influence of main and interaction effects be-
cause the standardized coefficients are mean-
ingless. However, if it is possible to develop ratio
scales for X and Z, then their relative effects
can be compared (Allison, 1977; Friedrich, 1982;
Southwood, 1978). Thus, if the theory relies on a
comparison of main and interaction effects, the
moderation perspective may be limited to cases
that accommodate ratio levels of measure-
ments.
The fourth issue focuses on partialling out the
quadratic effects of the original variables (X and
Z) in order to establish the presence or absence
of multiplicative effects. Southwood (1978) ar-
gued that in order to be sure that the relation-
ship is one of interaction rather than parabolic
curvilinearity, it is necessary to control by using
the terms X, Z, X^, Z^ and X Z simultaneously.
A test of the partial correlation between the de-
pendent variable Y and X • Z, after partialling
out the effects of X, Z, X^ and Z^, provides sup-
port for multiplicative interaction, whereas tests
of the partial correlation coefficients (a) between
Y and X^, after partialling out the effects of X, Z,
X • Z and Z^ and (b) between Y and Z^, after
partialling out the effects of X, Z, X • Z and X^,
provide evidence of curvilinearity. A review of
strategy and organizational research adopting
the moderation perspective indicates that extant
research has not incorporated such controls,
which weakens the interpretations. It is hoped
that future attempts at modeling fit as modera-
tion will rule out the rival explanation of plausi-
ble curvilinear effects of the original variables
when establishing the existence of joint, multi-
plicative effects.
Limitations. The moderation perspective of fit
is limited in at least two ways. One concerns the
inability to separate the existence of fit from the
effects of fit. It is important for investigators to
remember that statistical tests within this frame-
work involve either the assessment of the signif-
icance of a^ in Equation 3, which is an indica-
tion of the effect of fit (depicted by the interaction
 term) on the criterion variable Y, or the differ-
ence in the correlation coefficients, involving the
dependent variable Y across various groups
defined by either X or Z. Because specifying fit
as moderation refers to a criterion variable, its
meaning is intricately tied to the specific perfor-
mance variable and may not be generalizable
to other performance measures. Thus, if a re-
searcher is not interested in the performance ef-
fects of fit, but is interested in the existence of fit
in different subsamples, this perspective is inap-
propriate.
The second limitation pertains to the difficulty
involved in attaching theoretical meanings to
the interaction terms, especially multiple sets of
interactions and higher order interactions. The
problem inherent in the multiple sets of interac-
tions can be illustrated as follows: If strategy is
measured using a set of n variables and envi-
ronment is captured through a set of m vari-
ables, each variable reflects a specific theoreti-
cal content. Therefore, the moderating effects of
strategy and environment would be specified in
terms of a set of interaction variables (nXm).
However, this set collectively may not reflect the
moderating effects because relationships that
are implied by the set of individual interaction
components may not adequately represent the
nature of systemic interaction, implying an error
of logical typing (Bateson, 1979; Van de Ven &
Drazin, 1985).
An example of this problem is considered in a
study by Jauch, Osborn, and Glueck (1980),
which examined the financial performance im-
plications of the environment-strategy fit using a
multiplicative or moderation perspective. They
modeled fit as a set of 72 interaction terms, but
none of the 72 possible interactions were statis-
tically significant at thep < .05 level. Should this
be interpreted as a rejection of the performance
effects of environment-strategy fit (as they noted)
or should it more appropriately be understood
as empirical results that did not support the hy-
pothesis when tested using a moderation per-
spective? If the latter is concluded, the appropri-
ateness of using this perspective to test the un-
428
derlying theory should be questioned because
the moderation view of fit (viewed in terms of
multiplying individual strategy variables and
individual environmental variables) has little
theoretical basis; hence, it is not surprising that
Jauch and his colleagues (1980) did not find sig-
nificant multiplicative effects. Indeed, a careful
review of the research literature arguing for en-
vironment-strategy coalignment indicates that
the proponents of this view (e.g., Andrews, 1980;
Bourgeois, 1980; Miles & Snow, 1978) invoked
the notion of fit rather metaphorically, and it is
up to the empirical researcher to translate such
a theoretical position into a moderation perspec-
tive for analysis.
The problem inherent in higher order interac-
tions relates to the ambiguity of attaching any
clear theoretical meaning to these terms. Al-
though Allison (1977) has shown that three-way
interaction terms and higher order terms are not
susceptible to multicoUinearity problems (for in-
terval-level measurements), there is an inherent
theoretical limitation. Given that higher order
interactions often lack theoretical relevance,
their use should be carefully justified by sub-
stantive rather than empirical reasons. Thus, re-
searchers should be particularly persuasive
when attaching meaning to the higher order
terms.
Given these critical limitations, it is important
to recognize that as investigators should strive to
avoid inappropriately linking theoretical and
the empirical domains, they should view mod-
eration as one of many schemes to conceptual-
ize fit, and they should treat MRA as one of
many ways in which to test fit-based relation-
ships. Toward this end, five other perspectives
are discussed.
Fit as Mediation
Conceptualization. The mediation perspective
specifies the existence of a significant interven-
ing mechanism (e.g., organizational structure)
between an antecedent variable (e.g., strategy)
and the consequent variable (e.g., perfor-
mance). Thus, while moderation specifies vary-
 ing effects of an independent variable on a de-
pendent variable as a function of the moderat-
ing variable, this perspective specifies the
existence of intervening (indirect) effects be-
tween an antecedent variable and its conse-
quent variable.
The position of this perspective in Figure 1
should be explained. Like moderation, this per-
spective is anchored with respect to a particular
criterion variable. However, the functional form
of fit is, viewed simply as indirect effects, less
precise than the moderation perspective
(strength, form, quadratic effects, etc.). More-
over, more than two variables can be incorpo-
rated within this perspective, thus reducing the
level of precision that can be reflected in speci-
fying the functional form of fit.
The mediator variable accounts for a signifi-
cant proportion of the relation between the pre-
dictor and criterion. Stated formally, Z is a me-
diator of the probabilistic relation Y = f{X) if Z is
a probabilistic function of X (i.e., Z = f[X]) and Y
is a probabilistic function of Z (i.e., Y = f[Z]),
where X, Z, and Y include different theoretical
content (Roseboom, 1956). Figure 3 is a sche-
matic representation of fit as mediation involv-
ing three variables, where Z (e.g., strategy) acts
as a mediating mechanism (fit) between X {e.g.,
market-structure characteristics) and Y (e.g.,
firm performance). This is supported by the fol-
lowing set of equations:
= QQ + ajZ -I- a2X + e
X = bo + b^Z + e
Strategy researchers have embraced the
moderation perspective more often than the me-
X {e.g., Strategy)
Z (e.g.. Context) Y (Performance)
^ Figure 3. A schematic representation of fit as
' mediation.
diation perspective, but through the latter they
are able to recognize the differences in the var-
ious stages of a system of relationships. Al-
though neither perspective is superior, the
choice should be predicated by theoretical con-
siderations. For example, Hambrick, Mac-
Millan, and Day (1982) treated relative market
share as a moderator when analyzing effective-
ness of strategies across the four cells of a busi-
ness portfolio matrix, an analysis that is consis-
tent with portfolio matrix theory. Alternatively,
in examining the nature of the relationship (di-
rect vs spurious) between market share and
profit, Prescott, Kohli, and Venkatraman (1986)
treated market share as a mediator in a system
of relationships between strategy and profit
across different environmental contexts. Both
studies addressed the fit that strategy-market-
share has on performance, using different theo-
retical and analytical perspectives.
Similarly, if the classical industrial organiza-
tion economics paradigm (Scherer, 1980; Porter,
1981) of structure -^ conduct -^ performance is
used to test the role that firm-level strategic ac-
tions have in influencing the relationship be-
tween market-structure characteristics and firm
performance, both perspectives could be used
with differing theoretical meanings. The media-
tion perspective decomposes the effects that
market-structure characteristics have on firm
performance into direct effects versus indirect ef-
fects. In contrast, the moderation perspective is
(4)
useful to evaluate the differences in the relation-
(5)
ships between strategy and performance across
various environments (Prescott, 1986).
Analytical Issues. Tests of fit as mediation usu-
ally are carried out within a path-analytic
framework (cf. Alwin & Hauser, 1972; Blalock,
1969; Duncan, 1972). Consistent with the pri-
mary objectives of this article, only issues that
link theory and statistics, namely the distinction
between complete versus partial mediation and
the test for the performance effects of fit, are dis-
cussed.
The first issue, the distinction between com-
plete versus partial mediation, has important
429
theoretical implications for strategy research
that are best highlighted using a set of coeffi-
cients of the mediational model. For example,
this issue can address the dilemma of the rela-
tive importance of market-structure factors ver-
sus strategic-choice decisions (Figure 3). If the
coefficient a^ in Equation 4 is not statistically dif-
ferent from zero, the strongest support for the
mediating effects of Z is obtained. This implies
that the presence of Z is necessary for the trans-
mission of effects of X on Y, and this is termed the
complete mediational model. Thus, for testing
theoretical propositions rooted in the structure —>
conduct—* performance paradigm, firm conduct
plays a critical role in translating market-
structure opportunities into firm performance.
Alternatively, if the coefficient a^ is not zero, a
direct effect between X and Y exists, and an in-
direct effect between X and Y through Z exists,
implying a partial mediational model. This im-
plication means that partial effect is obtained
due to market structure, and partial effect is ob-
tained due to strategic decisions because of the
market-structure characteristics. Such tests di-
rectly address the theoretical position that firm
performance is a function of both structural fac-
tors and strategic choice (e.g., Andrews, 1980;
Bourgeois, 1980; Schendel & Hofer, 1979). Fi-
nally, if the direct effect, aj, is much stronger
than the indirect effects, this implies that firm
conduct plays an insignificant role.
The second issue, the test for the performance
effects of fit, is important because most theorists
seek to specify the effects of performance that
are attributable to fit. Thus, the usefulness of this
perspective depends on the availability of the
test statistic for the effects of fit. In other words,
although the test for a^ in Equation 3 provided
systematic statistical evidence for moderating
effects, a corresponding test for fit as mediation
is needed. However, this issue is complicated
because the impact of fit is given by the product
of two path coefficients, b^ • ag. Based on the
Simon-Blalock decompositional technique (Dun-
can, 1972), the following equation can be spec-
ified (see Prescott, Kohli, and Venkatraman,
430
1986, for details of estimation of these coefficients
within strategy research):
r = aj -I- a2 • bl + spurious effects (6)
where r^ is the observed zero-order correlation
between X and Y. (It is worthwhile to restrict the
discussion to cases in which this zero-order cor-
relation is large enough to make the decompo-
sition insightful.) The relative proportion of the
two effects—indirect (a2 ' bi) versus direct (aj)—
provides an index of the relative effect of fit
(namely, indirect effects) versus the direct ef-
fects. More formal, statistical corroboration is
provided through a test of the statistical signifi-
cance of the indirect effects through the media-
tor. Because this involves testing a product of
two regression coefficients, a standard f-test
cannot be adopted. Hence, an approximation
based on Sobel (1988) follows:
= (a, • b,)/V(bl +
where a2 and bj are as defined earlier and se
refers to the standard error of estimates.
It is important to note that although the previ-
ous discussion focused on a simple system of
relationships involving three variables {X, Z,
and Y), it can be conceptually and analytically
extended to multiple variables (Duncan, 1972),
even though estimation and interpretation prob-
lems could be more pronounced. Thus, the fit as
mediation perspective is positioned differently
from the moderation perspective in the classifi-
catory scheme.
Fit as Matching
Concepfuaiizafion. This perspective is in-
voked for strategy concepts in which fit is a theo-
retically defined match between two related
variables. This is a major point of departure
from the previous two perspectives because fit is
specified without reference to a criterion vari-
able, although, subsequently, its effect on a set
of criterion variables could be examined. Stated
differently, a measure of fit between two vari-
ables is developed independent of any perfor-
mance anchor, which is unlike the previous two
perspectives.
An example of this perspective is found in
Chandler's (1962) classical thesis that a diversi-
fication strategy requires a multidivisional struc-
ture, whereas a geographical expansion strat-
egy requires field units, and the absence of such
a match between structure and strategy leads to
administrative inefficiency or weaker perfor-
mance. Thus, the measure of strategy-structure
fit (0 or 1) can be derived based on the underly-
ing theory without reference to performance.
Such a theoretical proposition is most appropri-
ately operationalized within a matching per-
spective (Grinyer, Yasai-Ardekani, & Al-Bazzaz,
1980; Rumelt, 1974) and tested with the external
criterion of performance. Similarly, Chakravar-
thy (1987) stated that fit, within a planning-
system context, existed when the planning sys-
tem matches the required ideal system, and he
used this definition to test whether such a match
enhances system performance.
Analytical Issues. The matching perspective
has been supported by three somewhat related
analytical schemes: the deviation score analy-
sis, the residual analysis, and the analysis of
variance (ANOVA).
The deviation score analysis is based on a
premise that the absolute difference between
the standardized scores of two variables indi-
cates a lack of fit (e.g., Alexander & Randolph,
1985; Bourgeois, 1985). For instance, in the
three-variable system discussed earlier, IX —
Zl indicates the lack of fit between X and Z, and
the performance implications of fit are tested by
examining the impact that this variable has on
performance. The formal specification of the
equation follows:
Y = + + + - Zl) + e (7)
If the coefficient a^ is statistically significant in
Equation 7, then a hypothesis of performance
effects of fit is supported.
This analysis has intuitive appeal, but the
problems pertaining to the difference scores
(Johns, 1981) should be recognized. These in-
431
clude (a) the potential unreliability of the fit mea-
sure because the reliability of a difference score
IX - Zl is less than the average reliability of its
component parts {X and Z); (b) the possibility of
spurious association with an external vari-
able—even if the difference score has accept-
able reliability, it may be spuriously related to
the criterion variable through the effects of the
original components {X and Z); and (c) the
knowledge of generally weak discriminant va-
lidity if the transformed variable is not differen-
tiable from its component variables. Because re-
searchers who employ difference scores to mea-
sure fit within this perspective do not discuss
their response to such issues, it is not possible to
systematically assess the impact these scores
have on research results, but it is hoped that
investigators will be more sensitive to the poten-
tial problems in future studies.
Residual analysis reflects Dewar and Wer-
bel's (1979) operationalization of fit. In this
method, the residuals from the regression of one
variable (e.g., X) on the other (e.g., Z) are used
to reflect fit, which subsequently can be related
to the criterion variable (Y). According to this
perspective's proponents, the main advantages
are that "one can simultaneously test both uni-
versalistic and contingency predictions . . .
[and] one can obtain some idea of the magni-
tude of the different effects by comparing the
coefficients" (p. 436). But, in arguing for this ap-
proach, these authors reject the multiplicative
approach for multicoUinearity reasons, which is
ill-founded. This analysis is appropriate to test
fit-based relationships if the underlying theory is
conceptualized as deviation and if the limita-
tions of deviation scores are not serious. How-
ever, it is inappropriate for researchers to con-
ceptualize fit as moderation and to reject MRA
and favor the residual analysis because they
are not interchangeable.
The residual approach does include limita-
tions (Dewar & Werbel, 1979; Miller, 1982): (a) the
problems of choosing an appropriate baseline
model to calculate the residuals; (b) the con-
founding of error variance in residuals, in addi-
tion to measurement error; (c) the arithmetic sign
of the residuals; and (d) the need to distinguish
between the residual of Z on Z and the residuals
of Z on X, although both reflect the fit between X
and Z. At a minimum, researchers employing
this analysis should discuss the relevance and
implications of these issues in their specific re-
search context.
The third approach, the analysis of variance
(ANOVA), typically is used to test for interaction
effects, but Joyce, Slocum, and Von Glinow
(1982) used it to develop useful tests of fit reflect-
ing the matching perspective. They distin-
guished among three forms of fit—effect, gen-
eral, and functional—in a general congruency
model that hypothesized interaction effects, but
they emphasized the similarity and matching
levels of independent variables. A specific ad-
vantage of their analytical scheme is that they
could test competing perspectives of fit within a
common analytical framework (Joyce et al.,
1982).
Thus far, these three perspectives share one
common feature, namely, they are appropriate
for specifying bivariate fit, fit specified in various
functional forms between two variables, al-
though the second perspective can accommo-
date a larger system of relationships. In contrast,
the following perspectives are appropriate for
simultaneously specifying and testing fit among
a larger set of variables.
Fit as Gestalts
Conceptualization. When fit is conceptualized
and specified using two variables, it is possible
for investigators to invoke alternate perspectives
that have precise functional forms, but when
many variables are used, the degree of preci-
sion must be relaxed. One such multivariate
perspective is the identification of gestalts,
which is defined m terms of the degree of inter-
nal coherence among a set of theoretical at-
tributes.
The role of gestalts has been best described by
Miller: "Instead of looking at a few variables or
at linear associations among such variables we
432
should be trying to find frequently recurring
clusters of attributes or gestalts" (1981, p. 5).
Along similar lines. Miller and Friesen noted:
"Archetypes appear to represent a set of rela-
tionships which are in a temporary state of bal-
ance. The . . . situations which are described
seem to form a number of gestalts. There is
something holistic and ordered about the pat-
tern of . . . attributes" (1977, p. 264, emphasis
added), and such a pattern could provide useful
insights into a powerful concept of equifinality or
the feasible sets of internally consistent and
equally effective configurations.
Instead of gestalts, if the system were decom-
posed into a set of bivariate contingencies, it is
plausible that internal inconsistencies (mutually
conflicting directions) among multiple pairwise
contingencies would exist. As Child remarked:
"What happens when a configuration of differ-
ent contingencies are found, each having dis-
tinctive implications for organizational design?"
(1975, p. 175). A partial solution to this problem
may be the development of gestalts, which log-
ically extends the bivariate fit perspective
through a multitiered taxonomical approach
(Hambrick, 1984; Miller & Friesen, 1984). The po-
sition of the fit-as-gestalts perspective within the
classificatory framework (Figure 1) is deter-
mined by its being criterion-free and minimally
precise.
Analytical Issues. There are two major ana-
lytical issues regarding fit as gestalts, the de-
scriptive validity of the gestalts and the predic-
tive validity of the gestalts.
Descriptive validity requires that the gestalts
be interpretable in terms of the theoretical posi-
tions implied by fit. This is especially important
because most analytical schemes that are avail-
able for developing gestalts (e.g., cluster anal-
ysis, g-factor analysis) are inductive. (For a com-
prehensive discussion on alternate analytical
approaches to gestalt development, see Miller
and Friesen, 1984.) Although Miller (1981) ar-
gued that gestalts are "relatively few and very
different from one another, both in terms of the
scores of, and relationships among, variables,"
(p. 1) it is important to develop a set of formal
criteria to judge the descriptive validity of ge-
stalts. These criteria should include (a) testing
the number of gestalts using formal statistical
procedures like the C-H index (Milligan & Coo-
per, 1985), (b) demonstrating cluster stability us-
ing cross-validation of results with holdout sam-
ples, and (c) describing the gestalts based on the
theory that guided the selection of input vari-
ables for analysis.
Although the first two criteria address statisti-
cal concerns, the last one is important for theo-
rizing because there is a subtle but important
distinction between fit as gestalts and strat-
egy taxonomies. The latter represents an empir-
ical identification of naturally occurring strategy
types (Hambrick, 1983b; Miller & Friesen, 1984)
that does not use internal congruence, except
indirectly to name the gestalts. The selection of
the underlying variables for taxonomic inquiry
is guided by the need to balance parsimony and
exhaustiveness of coverage. In contrast, speci-
fying the testing of fit as gestalts requires a care-
ful enumeration of the underlying dimensions so
that the gestalts can be ordered along their lev-
els of fit or congruence. For example, in Miles
and Snow's (1978) theory of strategic adaptation
based on the notion of internal consistencies
among three problem domains (entrepreneur-
ial, engineering, and administrative), the pat-
tern of coalignment results in four strategy types
(prospectors, defenders, analyzers, and reac-
tors). A rigorous test of this theory requires using
the three problem domains as a basis to develop
four gestalts that can be interpreted in the light
of their theory. This ensures a tighter link be-
tween the underlying theory, the choice of di-
mensions, and the interpretations of the clusters
in light of the theory. Thus, although Miles
and Snow's (1978) typology is popular, unfortu-
nately its use in empirical research studies has
not yet been explicitly predicated on the pattern
of fit among the three dimensions.
Predictive validity is important for establish-
ing the performance implications of fit and for
demonstrating the existence of generic strategy
433
types or multiple configurations of equally suc-
cessful strategies. For instance, Etzioni argued
that "congruent [organizational] types are more
effective than incongruent types" (1961, p. 14,
emphasis added), and Child reported that high-
performing organizations had internally consis-
tent structural configurations, which were ab-
sent in poor-performing organizations. If such
propositions can be directly tested within a ge-
stalt perspective, the challenge is to incorporate
performance variable(s) into the analysis. One
approach for assessing predictive validity is to
follow Hambrick's suggestion of identifying sub-
samples of high- and low-performing busi-
nesses to identify profiles of fit within each sub-
sample. This approach would help a researcher
to develop distinct profiles of fit across the per-
formance categories, and to assess the possibil-
ity of discovering patterns of equifinality within
low- and high-performing businesses. Such an
approach enabled Hambrick (1983a, 1983b) and
Miller and Friesen (1978) to isolate generic suc-
cessful and unsuccessful gestalts in an explor-
atory fashion. However, because concepts of
equifinality and generic strategies rest on the
interplay between sound theoretical and statis-
tical criteria, more work is needed to develop the
link between theory and data analysis.
Fit as Profile Deviation
Conceptualization. In the profile-deviation
perspective, fit is the degree of adherence to an
externally specified profile, and it is akin to Van
de Ven and Drazin's (1985) usage of pattern
analysis. The role and use of this perspective
can be best introduced through the following
case. If an ideal strategy profile (e.g., the level of
resource deployments along a set of strategy di-
mensions) is specified for a particular environ-
ment, a business unit's degree of adherence to
such a multidimensional profile will be posi-
tively related to performance if it has a high
level of environment-strategy coalignment.
Conversely, deviation from this profile implies a
weakness in environment-strategy coalignment,
resulting in a negative effect on performance.
Figure 4, a schematic representation of this per-
spective, uses six illustrative dimensions of strat-
egy. (X3 refers to the values in the study sample,
and X^ refers to the calibration sample.)
This perspective is different from the gestalt
perspective because the referent profile is an-
chored to a specific criterion (typically, perfor-
mance), and thus it is positioned differently in
the classificatory framework. Therefore, in con-
trast to an exploratory development of multivari-
ate profiles of coherence, this perspective allows
a researcher to specify an ideal profile and to
demonstrate that adherence to such a profile
has systematic implications for effectiveness. Al-
though this perspective can be adopted in a va-
riety of research situations, it is particularly use-
ful for testing the effects of environment-strategy
coalignment (Andrews, 1980; Bourgeois, 1980;
Miles & Snow, 1978) because deviations in strat-
egy from an environment-specific ideal profile
should be negatively related to performance.
Venkatraman and Prescott (in press) argued that
this perspective best reflects the theoretical
proposition of performance effects of environ-
ment-strategy coalignment and employed it on
Strategy Standardized Scale for
Dimensions Importance Measuring the Dimensions
-1
X2
X,
X,
Figure 4. A schematic representation of fit as profile deviation.
434
a sample of PIMS-based businesses across eight
environments over two different time periods.
They found strong, consistent support for their
hypotheses because deviations in resource allo-
cation patterns from corresponding environ-
ment-specific profiles were strongly (negatively)
related to performance. This perspective also
can be logically extended to other research is-
sues in which ideal profiles are specified along a
set of theoretically related variables.
Analytical Issues. The interplay of critical is-
sues IS important in this conceptualization of fit
for (a) developing the ideal profile, (b) adding
differential weights for the multiple dimensions,
and (c) using a baseline model to assess the
power of the test.
The first issue focuses on developing a profile
that can serve as a benchmark for calibrating
the strategies of the businesses in a study. Re-
garding this issue, there a r e two obvious
choices. The first choice is theoretical, that is,
specifying the profile along a set of dimensions
that are appropriate for a particular environ-
ment. Although this choice is intuitively appeal-
ing, the operational task of developing such a
0 +1
profile with numerical scores along a set of di-
mensions is difficult. (For example. Porter, 1980,
provided a conceptual base for identifying the
ideal strategies for different generic environ-
ments, but it is not possible to translate his ver-
bal statements into numerical scores of ideal re-
source deployments for each environment.)
The second option is empirical, that is, devel-
oping this profile (cf. Drazin & Van de Ven, 1985;
Venkatraman & Prescott, in press) using a cali-
bration sample. In a strategy research context,
Venkatraman and Prescott (in press) developed
their profile of ideal strategic resource deploy-
ments using the mean scores of a calibration
sample—defined as the businesses that lie in
the top 10 percent on the performance scale
within an environment—that subsequently was
not used for the study sample. Because it is im-
portant to arrive at a valid ideal profile, it is sig-
nificant for investigators to use a hold-out sam-
ple, jackknifing for different proportions of the
sample and subsample replications, in order to
increase the robustness of the results.
The second issue concerns developing a mul-
tidimensional profile by using equal weights for
the dimensions or by differentially weighting the
dimensions, based on their relative importance
to the context. Drazin and Van de Ven (1985)
adopted the unweighted scheme but noted that
equal weights "can be relaxed by introducing
the possibility of differentially weighting the im-
portance of deviation . . . in determining
performance" (p. 351). For strategy research, as-
suming equal weights for the underlying strat-
egy dimensions is untenable because an effec-
tive package of strategic resource deployments
should reflect differential emphasis, which de-
pends on the importance of a particular dimen-
sion to the particular environment. Adopting
such a view, Venkatraman and Prescott (in
press) derived the weighting scheme from the
beta weights of the regression equations using
the array of strategy variables on performance
for each environment in the calibration sample.
Alternatively, where feasible, preference-
mapping procedures that include multidimen-
435
sional scaling (e.g., Carroll & Chang, 1967) for
assessing the effects of weighted versus un-
weighted distances in the measurement of fit
can be adapted.
The third issue pertains to the power of the
test, which requires the researcher to specify a
baseline model to demonstrate that the predic-
tive power of the measure of coalignment (cal-
culated as a weighted euclidean distance using
the profile of the calibration sample) is signifi-
cantly better than a measure calculated as de-
viation from a random profile. This nontrivial is-
sue is best explained through an analogy to the
discriminant analysis, where the power of the
discriminant function is demonstrated by its
ability to discriminate among certain groups
that use a set of discriminating variables. For
this purpose, the classificatory accuracy of the
model is compared against a chance or naive
model (Morrison, 1969). In Van de Ven and
Drazin's (1985) pattern analysis, a negative and
significant correlation coefficient between the
coalignment measure and the criterion demon-
strates the performance effects of fit. Because the
power of their test is unknown, it weakens the
interpretive ability of the empirical result. How-
ever, more powerful tests that discount rival hy-
potheses (e.g., deviations from any random pro-
file would exhibit an equally strong and signifi-
cant negative correlation coefficient) are needed
to empirically test this perspective in strategy re-
search.
Fit as Covariation
Conceptualization. According to this perspec-
tive, fit is a pattern of covariation or internal con-
sistency among a set of underlying theoretically
related variables, and it can be best described
through an illustration. If a business-unit strat-
egy in a particular context is best represented as
the pattern of consistent, concurrent resource al-
locations to the areas of research and develop-
ment, design, manufacturing, and marketing,
any one area is insufficient for an effective strat-
egy, which requires consistent attention to all
areas. For such a theoretical position, fit must be
specified among the four dimensions, and it is
most appropriately captured as the pattern of
covariation.
Fit as covariation is similar to megastrategy
(Mintzberg, 1978) or strategy as a pattern or
stream of major and minor decisions (Grant &
King, 1982; Miles & Snow, 1978). Both megastrat-
egy and a pattern of decisions are best repre-
sented as covariation among the constituent di-
mensions, rather than as any of the earlier per-
spectives (with the possible exception of gestalts
because this perspective also seeks to identify
similar units based on the scores along a set of
chosen variables and makes no claim regarding
the pattern of internal consistency among the
variables). Even though these perspectives may
appear similiar, gestalts are viewed as products
of cluster analysis (grouping of observations
based on a set of attributes), whereas covaria-
tion is modeled as factor analysis (grouping of
attributes based on data from a set of observa-
tions). Therefore, the position of fit as covariation
within the classificatory framework (Figure 1)
differs from position of the perspective of fit as
gestalts only in relation to the degree of specifi-
cation of the functional form. This perspective
requires a much greater precision in the pattern
of logical consistency among the factors and the
explication of the underlying logical link among
the attributes. For this perspective, for example,
general linear models like regression analysis
have limited use because they miss "the concept
of a central thread or internal logic underlying a
strategy, . . . [and the] regression coefficient
may have statistical significance, but may indi-
cate no apparent logical linkage among the var-
ious independent variables" (Hambrick, 1980, p.
571, emphasis added). Thus, it can be a major
challenge for the researcher to develop models
that best reflect the degree of covariation among
a set of attributes.
Analytical Issues. There are two critical issues
regarding specifying and testing fit as covaria-
tion: using the exploratory versus confirmatory
approach to specifying fit and testing the impact
that performance has on fit.
436
The first issue, distinguishing between the ex-
ploratory and confirmatory approach, is an age-
old social science research dilemma. Opera-
tionalizing fit as covariation is based on the ba-
sic principles of factor a n a l y s i s , that is,
explaining covariation among a set of indicators
in terms of a smaller set of factors (first-order
factors) and explaining the covariation among
the first-order factors in terms of second-order
factor(s). More specifically, fit as covariation is
specified as a second-order factor, and the first-
order factors represent the dimensions to be
coaligned (Venkatraman, 1986).
Covariation can be modeled in two ways: as
exploratory factor analysis (EFA) or as confirma-
tory factor analysis (CFA). Specifying a second-
order factor within EFA involves using a com-
mon factor analysis with oblique rotations and
correlations among the first-order factors to ex-
amine the possibility of second-order factors (cf.
Cattell, 1978, Chapter 9, for details). In contrast,
CFA (Joreskog & Sorbom, 1979) is used to test
one or more theoretically specified second-order
factor(s) against the observed data. Thus, unlike
EFA in which predefined mathematical criteria
are used to determine the optimal rotation that
may result in uninterpretable theoretical mean-
ing, CFA provides a basis to explicitly evaluate
a second-order factor model against an alterna-
tive model (one that may, for example, specify
only intercorrelated first-order factors).
When the relative benefits of both types of fac-
tor analysis are weighed (cf. Bagozzi, 1980;
Joreskog & Sorbom, 1979), the confirmatory ap-
proach is preferred for modeling fit as covaria-
tion. Figure 5, a schematic representation of this
perspective, pits two models against each other.
The left part of the model specifies the direct ef-
fects that four dimensions have on a criterion,
which is ineffectual for providing any insights
into the pattern of covariation among the four
dimensions. In contrast, the right side of the fig-
ure explicitly specifies the covariation among
the four dimensions as reflecting an internally
consistent business strategy, which in tum has
an effect on the criterion. The coalignment
among them is formally specified as an unob-
servable theoretical construct at a higher plane
than the individual functional dimensions.
There are no directly observable indicators for
this construct; its meaning is derived through di-
rectly operationalized first-order factors that in-
clude observable indicators reflecting the re-
source allocation patterns to the functions (e.g.,
indicators of functional strategy). In this specific
example, internal consistency is formally repre-
sented in the model, and its effect on perfor-
mance can be directly assessed.
The second issue, pertaining to testing the im-
pact that performance has on fit modeled as co-
variation can be described in terms of three
complementary test statistics: a comparison of
the coefficients of determination, the calculation
of the target coefficient T (Marsh & Hocevar,
1985), and the statistical significance of the sec-
ond-order factor loadings (Venkatraman, 1986).
Main effects moder
° Correlations among Xs are not drawn for
schematic clarity
Figure 5. A schematic representation of fit as covariation.
437
As described by Joreskog and Sorbom (1979),
if these two models are nested (one is a subset of
the other), it is possible to use the difference in a
chi-squared statistic (which follows a chi-
squared distribution) for assessing model supe-
riority. If the two parts of Figure 5 are not nested,
a chi-square difference test criterion (Joreskog,
1971) cannot be employed. Thus, a preliminary
indication of the model superiority can be pro-
vided by comparing the coefficients of determi-
nation of the two models (analogous to R^). A
more formal assessment requires the calculation
of a target coefficient {T). In keeping with Marsh
and Hocevar (1985), a second-order factor model
is merely a parsimonious explanation of the co-
variation among the first-order factors. Conse-
quently, even if the second-order factor model
effectively explains the covariation among the
first-order factors, the goodness of fit can never
exceed that of the first-order factor model. Marsh
Covariation model
Table 1
Comparing Alternate Perspectives oi tbe Concept of Fit in Strategy Research

Perspectives
Key Characteristics Fit as Moderation Fit as Mediation Fit as Matching

Underlying conceptualization Interaction Intervention Matching

of fit
Verbalization of a strategy
proposition
Number of vanables m the
specification of fit
Analytical schemeCs) for
testing fit
Measure of fit
Illustrative references
Required for model identification purposes.
The interactive effects of Market share is a key The match between strategy
strategy and managerial interverung variable and structure enhances
characteristics have between strategy administrative efficiency
implications for performance and performance
Two Two to multiple Two
Analysis of variance Path-analysis ANOVA
Moderated regression analysis Deviation scores
Subgroup analysis Residual analysis
Statistical derivation Statistical derivation Interval-level measure
Gupta & Govindarajan (1984) Prescott, Kohh, & Chandler (1962)
Prescott (1986) Venkatraman (1986) Bourgeois (1985)
Joyce, Slocum, & Von
Glinow (1982)
Dewar & Werbel (1979)

and Hocevar (1985) proposed using a Target co-
efficient (T)—the ratio of the chi-square of the
first-order model to the chi-square of the second-
order model, which has an upper bound of 1.00.
A value close to 1.00 will support using the co-
variation model versus the main-effects model,
and this model can be interpreted in a manner
similar to Bentler and Bonett's (1980) delta index,
until the distributional properties of T are estab-
lished. The third criterion is to assess the statisti-
cal significance of the four loadings {a^ through
04) on the second-order factor, termed as
coalignment. If the four first-order factors consis-
tently contribute to the second-order factor, all
four coefficients are expected to be significant.
If these three criteria are satisfied, fit as covari-
ation is the preferred specification, and the per-
formance effect of fit is given by the magnitude
and significance of coefficient a^.
Beyond a General Metaphor of Verbal
and Statistical Correspondence
In Table 1, the six perspectives of fit described
in this article are compared along several key
characteristics to highlight this fundamental dif-
ference. From this table, it is clear that the con-
cept of fit is more complex than a general met-
aphor requiring aligning distinct theoretical
meanings with analytical requirements.
Theorists in strategic management must move
from treating fit as a general metaphor that has
universal applicability. Researchers in general
do not provide guidance for operationalizing
theories of fit (cf. Bourgeois, 1980; Chakravarthy,
1987; Jauch & Osborn, 1981; Snow & Miles, 1983).
Words such as congruence, fit, and alignment
should be accompanied by descriptive guide-
lines that, at minimum, specify specific func-

438
Table 1—Continued
Comparing Alternate Perspectives of the Concept of Fit in Strategy Research

Perspectives
Fit as Gestalts Fit as Profile Deviation Fit as Covariation
Intemal congruence Adherence to a specified profile Internal consistency

The nature of intemal congruence
among a set of strategic variables
differs across "high" and "low"
performance businesses
Multiple
The degree of adherence to a The degree of intemal consistency in
specified profile has significant resource allocations has significant
effect on performance effect on performance
Multiple Four'^ to multiple

Numerical taxonomical The calculation of deviation as a Second-order factor analysis

methods—cluster analysis, factor
analysis
Ordinal/interval measure
Miller and Friesen (1984)
Hambrick (1984)
eucledian distance in an (confirmatory)
n-dimensional space MDS
Interval measure Interval measure
Van de Ven & Drazin (1985) Venkatraman (1986)
Venkatraman & Prescott (in press) Venkatraman & Walker (1989)

tional form(s). This classificatory scheme, based
on six perspectives of fit described in this article
should serve as a common reference point for
discussions, and it is hoped that future work will
exhibit increased sensitivity to the widely differ-
ing theoretical and empirical meanings of fit.
Choosing Among the Six Perspectives
Is any perspective better than the others? Al-
though it is tempting to rank the appropriateness
of these perspectives for different theoretical
questions, this may be a futile exercise because
of the intrinsic nature of the links among theory,
method, and data. The same theoretical ques-
tion can be used for more than one perspective,
which would be useful for cumulative theory
building. Moreover, for a particular research
stream, using exploratory perspectives that are
less precise in specifying the functional form of
fit may now be more appropriate, but as the
research stream matures, using confirmatory
perspectives would be more appropriate.
Explicit Justification of the Specification of Fit.
Researchers must explicitly justify their specifi-
cation of fit within a particular research context.
They should abandon random and convenient
statistical methods, recognizing that research
results are sensitive to this choice. Just as strat-
egy researchers routinely demonstrate the link
between defining their concept and operation-
alizing their measures (Venkatraman & Grant,
1986), they also should justify the specification of
fit between or among the constructs.
For example, Gupta and Govindarajan (1984)
developed a hypothesis that reflected the per-
spective of fit as moderation; however, fit could
have been operationalized through a matching
perspective or as a mediational perspective.

439
Their empirical results would have been richer if
they had compared the moderation perspective
against the alternative perspectives. Because
this process was not followed, the empirical
demonstration of the impact that the strategy-
manager fit has on performance may not be
generalizable beyond the moderation perspec-
tive. Similarly, are the results of Bourgeois' (1985)
study of the difference-score approach of the
mediation perspective generalizable? Also,
would Chakravarthy's (1987) results on the ab-
sence of performance effects of tailoring strate-
gic planning systems to the context hold up if
they were tested within the perspective of profile
deviation?
Such questions stem from the triangulation
concept, which advocates testing theoretical re-
lationships by using multiple measures and
multiple methods (Denzin, 1978; Jick, 1979), and
they are relevant because the hypothesis of the
effects of performance on structure-context fit
was supported using some perspectives and not
others (cf. Drazin and Van de Ven, 1985; Joyce et
al., 1982). Also, the theory of the impact that per-
formance has on the environment-strategy
coalignment was supported using subgroup
analysis, reflecting the strength of moderation
(Prescott, 1986), for fit as profile deviation (Ven-
katraman & Prescott, in press), but not within a
moderated regression perspective (Jauch et al
1980).
Role of Multiple Perspectives
For the investigator, a critical issue in study-
ing strategic management is the benefit of using
multiple perspectives. This general theme is dis-
cussed in two ways, the use of multiple concepts
and the use of multiple statistical tests within a
data set.
Multiple Concepts of Fit. Which perspective is
most appropriate for a given research question?
One way to answer this question is for the re-
searcher to consider multiple specifications as
competing theories or models, especially in
440
cases in which the extant research may not be
powerful enough to suggest rejecting the theo-
ries outright. For example, in situations involv-
ing the fit between only two concepts, only mod-
eration, mediation, and matching could be
considered. Although not a generalizable state-
ment, these three could be considered as com-
peting perspectives for most research questions.
Unfortunately, this issue has been left open for
interpretation according to strategic manage-
ment literature. Researchers have invoked theo-
retical perspectives that are relevant to moder-
ation, mediation, and matching in very general
terms, but have specified a functional form of fit
that is appropriate for only one perspective.
Since this article has shown that moderation,
mediation, and matching are theoretically and
empirically different and it has advocated that fit
as gestalts and fit as profile deviation can be
used as complementary perspectives when mul-
tiple variables are involved, identifying relevant
competing models in a particular study could
lead to more useful and powerful operational-
ization, data collection, data analysis, and inter-
pretation.
Multiple Statistical Tests Within a Data Set: A
"Triangulation-Trap"? Do researchers have the
option of using multiple tests of fit within a single
empirical study? When Tosi and Slocum (1984)
suggested guidelines for contingency theory re-
search, they noted that "statistical techniques
have frustrated researchers' attempts to test for
the interaction effects being modeled because
each technique has implied biases. Researchers
need to compare the utility of each of these sta-
tistical techniques using the same data set" (p.
16, emphasis added). Van de Ven and Drazin
(1985) made a similar recommendation: "Studies
should be designed to permit comparative eval-
uation of as many forms of fit as possible. . . .
Examining multiple approaches to fit in contin-
gency studies and relating the findings to
unique sample characteristics can greatly aid
the development of mid-range theories of what
approach to fit applies where" (pp. 358-360).
Specifically, by using multiple specifications
 they uncovered insightful nuances of the struc-
tural contingency theory that otherwise may not
have been possible.
Philosophically, this recommendation is fine,
but, before researchers use multiple perspec-
tives within a single study, they should evaluate
both the appropriateness of each perspective
and the design for collecting data because not
all theoretical statements are amenable to the
six perspectives, and measurement schemes
may limit the use of some perspectives. More
important, the nonconvergence of results across
multiple statistical tests can be ambiguous. If re-
sults converge across multiple perspectives, ev-
idence of robustness is provided; however, the
converse is not true. For example, for one data
set, Drazin and Van de Ven (1985) reported that
their theory was supported using a systems ap-
proach, but it was not using an interaction ap-
proach. Do their results imply differential sup-
port for the competing theoretical perspectives,
or should the similarities among these perspec-
tives be evaluated using multiple tests within the
same data set?
Additionally, for a random data set, what is
the probability of researchers' accepting a theo-
retical relationship of the impact that perfor-
mance has on fit across a subset of comparable
perspectives? For instance, suppose that three
different researchers are seeking to test the
same underlying theory of the impact that per-
formance has on fit between two independent
variables X and Z by using the perspective of
moderation, matching, and mediation. Further,
suppose they independently obtain a similar
pattern of correlations among the three vari-
ables, X, Y, and Z. What is the probability that
their results would converge, irrespective of the
specific values in the correlation matrices? An-
swers to this question explicate the fundamental
nature of the relationships between and among
the three perspectives that are independent of
the specific theory being tested, and they are
useful for pointing out the appropriateness of
pursuing multiple tests of fit. Until it is shown that
there is no a priori preference (bias) of one test.
441
researchers should be cautious about triangula-
tion within a data set, after the fact.
A Monte Carlo simulation can answer this
question by accommodating varying patterns of
correlations among X, Y, and Z and by perform-
ing tests of convergence. Because the probabil-
ity of convergence across the perspectives of
moderation, matching, and mediation is close to
zero, recommendations employing after-the-fact
attempts (Tosi & Slocum, 1984) to assess triangu-
lation are of limited use. Indeed, if a random
data set is used, the probability of finding sup-
port for any one perspective is quite high.
Thus, multiple perspectives can be useful
when researchers present theoretically argued
competing models, but not when the data are
subjected after the fact to multiple statistical tests
that explore the extent of support for different
perspectives.
Longitudinal Operationalizations of Fit
The perspectives discussed in this article have
focused on static, cross-sectional approaches for
specifying and testing fit within strategy re-
search. However, coalignment is a dynamic
and never-ending task, whereby the organiza-
tion is continually "shooting at a moving target
of coalignment" (Thompson, 1967, p. 234).
Therefore, no organizational system is in a state
of perfect dynamic coalignment, but every orga-
nization is moving toward this state. Several in-
teresting theoretical issues are based on this dy-
namic perspective of fit, such as the forces that
explain organizational movement toward ver-
sus away from equilibrium (fit), the short-term
benefits of fit versus the long-term benefits of fit,
the possible trade-offs between short-run fit ver-
sus long-term fit. Although these are interesting
theoretical issues, it is unclear whether the six
perspectives identified here are appropriate for
testing them. Even though this article does not
cover the issue of dynamism, it is recognized as
a promising area of research for the develop-
ment of appropriate mechanisms to specify and
test fit within a longitudinal perspective.
 Summary
Fit, as a general concept, is central to the
study of strategic management. Yet, theory in
this area must be extended to clarify the specific
meaning of fit as used in various settings, to de-
velop strong links between verbalizations and
statistical testing schemes, and to test relation-
ships by using multiple comparable statistical
References
Aldrich, H. E. (1979) Oiganization and environments. Engle-
wood, NJ: Prentice-Hall.
Alexander, ]. W., & Randolph, W. A. (1985) The fit between
technology and structure as a predictor of performance in
nursing subunits. Academy of Management Journal, 28,
844-859.
Allison, P. D. (1977) Testing for interaction in multiple regres-
sion. Ameiican Journal of Sociology, 83, 144-153.
Alwin, D. F., & Hauser, R. M. (1972) The decomposition of
effects in path analysis. American Sociological Review,
40, 37-47.
Andrews, K. R. (1980) The concept oi corporate strategy.
New York: Dow Jones-Irwin.
Arnold, H. (1982) Moderator variables: A clarification on
conceptual, analytic and psychometric issues. Organiza-
tional Behavior and Human Performance. 29, 143-174.
Amold, H. J., & Evans, M. G. (1979) Testing multiplicative
models does not require ratio scales. Organizational Be-
havior and Human Performance, 24, 41-59.
Bagozzi, R. P. (1980) Causal models in marketing. New York-
Wiley.
Bateson, G. (1979) Mind and nature. New York: Dutton.
Bentler, P. M., & Bonett, D. G. (1980) Significance tests and
goodness of fit in the analysis of covariance structures.
Psychological Bulletin, 88, 588-606.
Blalock, H. M., Jr. (1965) Theory building and the statistical
concept of interaction. American Sociological Review 30
374-380.
Blalock, H. M., Jr. (1969) Theory construction: From verbal to
mathematical formulations. Englewood Cliffs NJ- Pren-
tice-Hall.
Bourgeois, L. J., m (1980) Strategy and environment: A con-
ceptual integration. Academy of Management Review 5
25-39. ' '
Bourgeois, L. J., HI (1985) Strategic goals, perceived uncer-
tainty, and economic performance in volatile environ-
ments. Academy of Management Journal, 28, 548-573.
442
schemes wherever feasible. Toward this end,
six concepts of fit within strategic management
have been discussed. For each perspective,
available statistical schemes highlighted the iso-
morphic nature of the link between the theory
and the testing scheme, and it was demon-
strated that the statistical methods are not freely
interchangeable without confounding the un-
derlying theoretical meaning of fit.
Bruning, J. L., & Kintz, B. L. (1987) Computational handbook
of statistics. Glenview, IL: Scott, Foresman.
Carroll, J. D., & Chang, J. J. (1967) fleiatog preference data
to multidimensional scaling solutions via a generalization
of Coombs' unfolding model. (Available from Bell Labs,
New Jersey)
Cattell R. B. (1978) The logic and use of factor analysis. San
Francisco: Jossey-Bass.
Chakravarthy, B. S. (1987) On tailoring a strategic planning
system to its context: Some empirical e-vidence. Strategic
Management Journal, 8, 517-534.
Chandler, A. D. (1962) Strategy and structure. Cambridge,
MA: MIT Press.
Child, J. (1975) Managenal and organization factors associ-
ated with company performance—Part H, A contingency
analysis./ournai o/Managemenf Sfudies, 12, 12-27.
Denzin, N. K. (1978) The research act. New York: McGraw-
Hill.
Dewar, R., & Werbel, J. (1979) Universalistic and contin-
gency predictions of employee satisfaction and conflict.
Administrative Science Quarterly, 24, 426-448.
Drazin, R., & Van de Ven, A. H. (1985) An examination of
alternative forms of fit in contingency theory. Administra-
tive Science Quarterly, 30, 514-539.
Duncan, O. D. (1972) Path analysis: Sociological examples
(plus addenda). In H. M. Blalock (Ed.), Causal models in
sociai science (pp. 115-138). Chicago: Aldine-Atherson.
Egelhoff, W. G. (1982) Strategy and structure in multina-
tional corporations: An information processing approach.
Administrative Science Quarterly, 27, 435-458.
Etzioni, A. (1961) A comparative analysis of complex orga-
nizations. New York: Free Press.
Friedrich, R. J. (1982) In defense of multiplicative terms in
multiple regression equations. American Journal of Poht-
ical Science, 26, 797-833.
Fry, L. W., & Smith, D. A. (1987) Congruence, contingency.
 and theory building. Academy of Management Review,
12, 117-132.
Galbraith, J. R., & Nathanson, D. (1979) The role of organi-
zational structure and process in strategy implementation.
In D. Schendel & C. W. Hofer (Eds.), Strategic manage-
ment: A new view of business policy and planning (pp.
249-283). Boston: Little, Brown.
Ginsberg, A., & Venkatraman, N. (1985) Contingency per-
spectives on organizational strategy: A critical review of
the empirical research. Academy of Management Re-
view, 5, 25-39.
Grant, J. H., & King, W. R. (1982) The logic of strategic plan-
ning. Boston: Little, Brown.
Grinyer, P. H., Yasai-Ardekani, M., & Al-Bazzaz, S. (1980)
Strategy, structure, the en-vironment, and financial perfor-
mance in 48 U.K. companies. Academy of Management
Journal, 23, 193-220.
Gupta, A. K. (1984) Contingency linkages between strategy
and general manager characteristics: A conceptual ex-
amination. Academy of Management Review, 9, 399-412.
Gupta, A. K., & Go-vindarajan, V. (1984) Business unit strat-
egy, managerial characteristics, and business unit effec-
tiveness at strategy implementation. Academy of Man-
agement Journal, 27, 25-41.
Hambrick, D. C. (1980) Operationalizing the concept of busi-
ness-level strategy in research. Academy of Management
Review, 5, 567-575.
Hambrick, D. C. (1983a) An empirical typology of mature
industrial product environments. Academy of Manage-
ment Journal, 26, 213-230.
Hambrick, D. C. (1983b) High profit strategies in mature cap-
ital goods industries: A contingency approach. Academy
of Management Journal, 26, 687-707.
Hambrick, D. C. (1984) Taxonomic approach to studying
strategy: Some conceptual and methodological issues.
Journal of Management, 10, 27-42.
Hambrick, D. C , MacMillan, I. C , & Day, D. L. (1982) Stra-
tegic attributes and performance in the BCG matrix—a
PIMS-based analysis of industrial product businesses.
Academy of Management Journal, 25, 510-531.
Harrigan, K. R. (1983) Research methodologies for contin-
gency approaches to business strategy. Academy of Man-
agement Review, 8, 398-405.
Hitt, M. A., Ireland, R. D., & Palia, K. A. (1982) Industrial
firm's grand strategy and functional importance: Moder-
ating effects of technology and uncertainty. Academy of
Management Journal, 25, 265-298.
Hitt, M.A., Ireland, R. D., & Stadter, G. (1982) Functional
importance and company performance: Moderating ef-
fects of grand strategy and industry type. Strategic Man-
agement Journal, 3, 315-330.
443
Hofer, C. W. (1975) Toward a contingency theory of business
strategy. Academy of iVfanagemenf/ournai, 18, 784-810.
Hofer, C. W., & Schendel, D. E. (1978) Strategy formulation:
Analytical concepts. St. Paul, MN: West.
Jauch, L. R., & Osborn, R. N. (1981) Toward an integrated
theory of strategy. Academy of Management Review, 6,
491-498.
Jauch, L. R., Osborn, R. N., & Glueck, W. F. (1980) Short-
term financial success in large business organizations:
The environment-strategy connection. Strategic Manage-
ment Journal, 1, 49-63.
Jick, T. D. (1979) Mixing qualitative and quantitative meth-
ods: Triangulation in action. Administrative Science Quar-
terly, 24, 602-611.
Johns, G. (1981) Difference score measures of organizational
behavior variables: A critique. Organizational Behavior
and Human Performance, 27, 443-463.
Joreskog, K. G. (1971) Statistical analysis of congenenc tests.
Psychometrika, 36, 109-133.
Joreskog, K. G., & Sorbom, D. (Eds.) (1979) Advances m fac-
tor analysis and structural equation models. Cambridge,
MA: Abt Books.
Joyce, W., Slocum, J., & Von Glinow, M. (1982) Person-
situation interaction: Competing models of fit. Journal of
Occupational Behavior, 3, 265-280.
Lorange, P., & Vancil, R. F. (1977) Strategic planning sys-
tems. Englewood Cliffs, NJ: Prentice-Hall.
Marsh, H. W., & Hocevar, D. (1985) The application of con-
firmatory factor analysis to the study of self-concept: First-
and higher-order factor models and their invariance
across groups. Psychological Bulletin, 97, 562-582.
Miles, R. E., & Snow, C. C. (1978) Organiza/ionai strategy,
structure, and process. New York: McGraw-Hill.
Miller, D. (1981) Toward a new contingency perspective: The
search for organizational gestalts. Journal of Management
Studies, 18, 1-26.
Miller, D., & Friesen, P. H. (1977) Strategy making in context:
Ten empirical archetypes. Journal of Management Stud-
ies, 14, 259-280.
Miller, D., & Friesen, P. H. (1978) Archetypes of strategy for-
mulation. Management Science, 24, 921-933.
Miller, D., & Friesen, P. H. (1984) Organizations: A guanfum
view. Englewood Cliffs, NJ: Prentice-Hall.
Miller, J. P. (1982, August) Toward clarity in contingency hy-
pothesis analysis. Paper presented at the meeting of the
Academy of Management, New York.
Milligan, G. W., & Cooper, M. C. (1985) An examination of
procedures for determining the number of clusters in a
data set. PsychomefriJca, 50, 159-179.
Mintzberg, H. (1978) Patterns in strategy formation. Manage-
ment Science, 24, 934-948.
Morrison, D. G. (1969) On the interpretation of discriminant
analysis./ournai of A^arJreting Research, 6, 156-163.
Porter, M. E. (1980) Compefi/ive strategy. New York: Free
Press.
Prescott, J. E. (1986) Environment as a moderator of strategy-
performance relationship. Academy of Management Jour-
nal, 29, 329-346.
Prescott, J. E., Kohli, A. K., & Venkatraman, N. (1986) The
market share-profitability relationship: An empirical as-
sessment of assertions and contradictions. Strategic Man-
agement Journal, 7, 377-394.
Roseboom, W. W. (1956) Mediation variables in scientific
theory. Psychological Review, 63, 249-264.
Rumelt, R. P. (1974) Strategy, structure and economic per-
formance. Boston: Harvard University, Graduate School
of Business Administration.
Schendel, D. E., & Hofer, C. W. (1979) Strategic manage-
ment: A new view of business policy and planning. Bos-
ton: Little, Brown.
Schoonhoven, C. B. (1981) Problems with contingency the-
ory: Testing assumptions hidden withm the language of
contingency "theory." Administrative Science Quarterly,
26, 349-377.
Sharma, S., Durand, R. M., & Gur-Ane, O. (1981) Identifi-
cation and analysis of moderator variables. Journal of
Marketing Research, 18, 291-300.
Snow, C. C, & Miles, R. E. (1983) The role of strategy in the
development of a general theory of organizations. In R.
Lamb (Ed.), Advances in strategic management (Vol. 2,
pp. 231-259). Greenwich, CT: JAI Press.
Southwood, K. E. (1978) Substantive theory and statistical
interaction: Five models. American Journal of Sociology,
83, 1154-1203.
Thompson, J. D. (1967) Organizations in action. New York:
McGraw-Hill.
Tosi, H. L., Jr., & Slocum, J. W., Jr. (1984) Contingency the-
ory: Some suggested directions. Journal of Management,
10, 9-26.
Van de Ven, A. H. (1979) Review of Aldrich's (1979) book—
Organization and environments. Administrative Science
Quarterly, 24, 320-326.
Van de Ven, A. H., & Drazin, R. (1985) The concept of fit in
contingency theory. In L. L. Cummings & B. M. Staw
(Eds.), Research in organizational behavior (Vol. 7, pp.
333-365). Greenwich, CT: JAI Press.
Venkatraman, N. (1986, August) Performance implications
of strategic coalignment. Paper presented at the meeting
of the Academy of Management, Chicago.
Venkatraman, N., & Camillus, J. C. (1984) Exploring the con-
cepts of "fit" in strategic management. Academy of Man-
agement Review, 9, 513-525.
Venkatraman, N., & Grant, J. H. (1986) Construct measure-
ment in strategy research: A critique and proposal. Acad-
emy of Management Review, 11, 71-87.
Venkatraman, N., & Prescott, J. E. (in press) Environment-
strategy coalignment: An empincal examination of its per-
formance implications. Strategic Management Journal.
Venkatraman, N., & Walker, G. (1989) Strategic consistency
and business performance: Theory and analysis. Working
paper, Massachusetts Institute of Technology, Sloan
School of Management, Cambridge, MA.

N. Venkatraman (Ph.D., University of Pittsburgh) is

Assistant Professor of Management, MIT Sloan School
of Management, Massachusetts Institute of Technol-
ogy, Cambridge, MA. Correspondence regarding this
article should be addressed to iiim at £52-553 Sloan
Building, MIT, Cambridge, MA 02139.
This is a significantly revised and expanded version
of a paper that appeared in the Academy of Manage-
ment Best Paper Proceedings, 1987. Discussions dur-
ing (he seminars at the Kellogg Graduate School of
Business Administration. Northwestern University,
Graduate School of Business Administration, New
York University, and Sloan School of Management,
Massachusetts Institute of Technology, were useful in
preparing this version. Gregory Dess, Qscar Haupt-
man, John Henderson, John Prescott, Vasu Ramanu-
jam, Harbir Singh, and Meera Venkatraman read
previous drafts and made useful comments and sug-
gestions.

444