Intraindustry Differential Firm Performance: Extension of the Attention-Based Theory to Strategy Formation

In the strategy literature, much research has been conducted about factors and processes influencing strategy formation with the objective to reap sustainable intraindustry differential firm performance. In this theory-development paper, I argue that the integration of insights taken from different threads of strategy process research can create new findings which comprise of a higher level of complexity. In an explorative simulation study, I draw on research about firm's scanning behavior, influences of both environmental context and organizational conditions on strategy formation to derive three propositions about intraindustry differential
firm performance. The first proposition indicates that an initial performance advantage cannot be sustained in the long-term, even when knowledge spill-over effects can be avoided, and implicates
further strengthening of advantages even when they are not considered necessary. The second proposition suggests that a sustained performance advantage emerges in the long run when
innovations are initiated at higher relative levels of firm inertia. The third proposition shows that reaching a firm's optimal fitness configuration that balances internal and external demands is a fine-grained dynamics process. It requires mangers to have detailed knowledge about firm's perception mechanisms as well as to be aware about possible approaches to scan the relevant environment.