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...development of appropriate strategic responses (Abell, 1980; Sidhu, Nijssen, and Commandeur, 2000; Weinstein, 1998). Drucker (1974) went so far as to say that managerial neglect of the "what business are we in?" issue is the number one cause of organization frustration and failure.
In recent years, the business-domain discipline has acquired additional significance because of fundamental technological changes. These have complicated the task of identifying competitors and defining the business-domain by blurring the boundaries between industries. Consider for example the difficulty of demarcating market boundaries in the case of firms operating in converging industries such as cable television, computers, and telecommunications. Unfortunately, empirical research has not kept pace with changes in the business environment. Indeed, only a handful of studies to date have focused on the issue of how organizations delineate their business domain and the consequences thereof (e.g., Feeser and Willard, 1990; Frazier and Howell, 1983). Further, much of this research has been in the context of relatively larger American companies. Very little is known about how smaller companies, especially those outside the United States, deal with the challenge of defining the business domain meaningfully in order to guide strategy formulation and implementation in the current turbulent times.
This study looks into the performance implications of explicit business-domain definition in the context of small and medium-sized companies. While past work has reported widespread use of written business-domain statements (e.g., Klemm, Sanderson, and Luffman, 1991) as well as the practical problems encountered in developing one (e.g., McTavish, 1995), it remains an open issue whether such a statement confers any tangible performance benefits on an organization. The multi-media sector in the Netherlands, which includes firms in the information technology, office equipment, printing and publishing and telecommunication industries, is the setting for the present study. This sector is interesting because of technological and market uncertainties facing multi-media companies. Environmental uncertainty may be expected not only to make the task of business-domain definition more difficult but also to make explicit business-domain definition potentially more rewarding. A distinguishing feature of this study is that the comprehensiveness of the strategy planning process as well as the strategy content (i.e., what strategy is followed) variables are explicitly included in the research design. Including these variables allows the model to control for the possibility that the business-domain variable does not merely operate as a surrogate for effective strategy and that it has an independent effect on performance. Moreover, scholars suggest that empirical studies should be more comprehensive and include both strategy process and content variables to avoid spurious findings (e.g., Powell, 1992).
Theory and Hypothesis
The business-domain concept refers to how an organization draws competitive boundaries. It describes a company's competitive arena in terms of the customers it wants to serve and the technologies to be used. Described thus, the business-domain concept is an essential part of the larger construct of mission but is not isomorphic to it. A mission statement may also include a description of the organization's vision or purpose and its competencies and values (see...
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