Determinants and Performance Consequences of Corporate Development and Strategy Function Size

The corporate development and strategy function (CDSF) at firms’ headquarters is critical for their strategy activities, yet we know little about its design and structure. We argue that environmental uncertainty, strategic task demands, and structural complexity affect the need for strategy resources at the corporate level and, thus, the size of the CDSF. Drawing upon a survey of strategy heads from 105 large, listed European firms as well as archival data, we find that a firm’s market fragmentation, related diversification strategy, acquisition activity, overall size, and organizational centralization are positively associated with the number of CDSF employees. We also find, however, that the function’s size does not affect a firm’s financial performance.