Grand Strategies Re-visited—Less ons for High Technology Small and Medium Sized Firms Nicholas O'Regan, Bristol Business School, Brist ol, UKGerhard Kling, Bristol Business School, Bristol, UKAbby Ghobadian, Henley Business School, UKTHIS IS !T TH" FI#L $%!ST-R"&I"'( &"RSI!)!* FI+ TH" FI#L &"RSI!H"R", O’Regan, N., Kling, G., Ghobadian, A. and . !erren "#$%#& Strategic ositioning and grand strategies (or high)technology S*+s, Strategic Change#%")-&%//)#%. Keywords:Grand strategies, inno0ation, strategy, co1etiti0e ad0antage 2orresonding authorNicholas.O’Regan3u4e.ac.u56elehone 7 88 %%9 :#; :9:Nicholas O’Regan is !ro(essor o( Strategy<+nterrise and =nno0ation at Bristol Business School, Uni0ersity o( the >est o( +ngland. His research int ere sts inc lude the organi sat ion al cul ture, lea der shi and the str ate gic lanning rocesses o( s1all and 1ediu1 si?ed organisations. Gerhard Kling is Senior ecturer in Strategic *anage1ent at Bristol Business School . His res ear ch int erests inc lude the ad0a nce 1ent o( co1et iti 0e ad0ant age in 1an u(a cturi ng hig h tec hnol ogy s1a ll (ir 1s and cor or ate (inance. He 4as re0iously ractice secialist 4ith *cKinsey @ 2o1any, based in *unich. Abby Ghobadian is !ro(essor o( Organisational !er(or1ance and irector o( the School o( !roects !rocesses and Syste1s at Henley Business School, Uni0ersity o( Reading. His research is (ocused on identi(ying (actors that contri but e to di( (er ent ial er (or 1ance a1ong organi sat ion s. His res ear ch dr a4s on cont e1ora ry 1a nage 1e nt th eori es and re li es on sound 1ethodologies 4ith a strong bias to4ards rele0ance to racticing 1anagers %
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Grand Strategies Re-visited—Lessons for High Technology
Small and Medium Sized Firms
Nicholas O'Regan, Bristol Business School, Bristol, UK
Gerhard Kling, Bristol Business School, Bristol, UK
Abby Ghobadian, Henley Business School, UK
THIS IS !T TH" FI#L $%!ST-R"&I"'( &"RSI!
)!* FI+ TH" FI#L &"RSI! H"R",
O’Regan, N., Kling, G., Ghobadian, A. and . !erren "#$%#& Strategic ositioning and
grand strategies (or high)technology S*+s, Strategic Change #%")-& %//)#%.
Keywords: Grand strategies, inno0ation, strategy, co1etiti0e ad0antage
2orresonding author Nicholas.O’Regan3u4e.ac.u5
6elehone 7 88 %%9 :#; :9:
Nicholas O’Regan is !ro(essor o( Strategy<+nterrise and =nno0ation atBristol Business School, Uni0ersity o( the >est o( +ngland. His research
interests include the organisational culture, leadershi and the strategic
lanning rocesses o( s1all and 1ediu1 si?ed organisations.
Gerhard Kling is Senior ecturer in Strategic *anage1ent at Bristol Business
School. His research interests include the ad0ance1ent o( co1etiti0e
ad0antage in 1anu(acturing high technology s1all (ir1s and cororate(inance. He 4as re0iously ractice secialist 4ith *cKinsey @ 2o1any,
based in *unich.
Abby Ghobadian is !ro(essor o( Organisational !er(or1ance and irector o(
the School o( !roects !rocesses and Syste1s at Henley Business School,
Uni0ersity o( Reading. His research is (ocused on identi(ying (actors that
contribute to di((erential er(or1ance a1ong organisations. His researchdra4s on conte1orary 1anage1ent theories and relies on sound
1ethodologies 4ith a strong bias to4ards rele0ance to racticing 1anagers
%
Grand Strategies Re-visited—Lessons for High Technology
Small and Medium Sized Firms
#stract
Based on sur0ey data on the engineering and electronic industry, the study unco0ers the
grand strategies ursued by s1all high technology (ir1s and, in articular, analy?es the
i1act o( (or1al strategic lanning and industry seci(ic e((ects on strategic choice. 6he
e1irical 1odel disentangles the interrelationshi bet4een the (ir1’s co1etiti0e osition, 1ar5et en0iron1ent "technological and regulatory change, threats (ro1
substitutes, ne4 entrants, and 1ar5et stability& and the ursued grand strategies. 6he
(indings indicate that (ir1 si?e, in ter1s o( turno0er, a((ects strategic decisionssigni(icantly. 6echnological change and 1ar5et stability sti1ulate roduct de0elo1ent
and inno0ation. An inno0ation strategy see1s to be the only grand strategy that
guarantees higher short and long)ter1 er(or1anceC ne0ertheless, concentrated gro4th,1ar5et and roduct de0elo1ent (oster long)ter1 er(or1ance.
Keywords: Grand strategies, inno0ation, strategy, co1etiti0e ad0antage
Grand Strategies Re-visited—Lessons for High Technology small and medium sized
Firms
./ Introduction
Organisational strategies are classi(ied into three di((erent le0elsC cororate, business and
(unctional le0els D"HaE and *alu(, "/;8C, Bourgeois, %/;$&. +ach le0el has distinct
characteristics. For eEa1le, the cororate)le0el strategy is concerned 4ith do1ain
selection or which industry sector"s& to co1ete in "Bourgeois, %/;$&, 4hereas the
business)le0el strategy is concerned 4ith do1ain na0igation, 4hich includes how to
co1ete in a selected 1ar5et seg1ent "Ha1bric5, %/;$&. Functional)le0el strategies are
deri0ed (ro1 the business strategy and (ocus on the 1aEi1isation o( resource
roducti0ity. =n general, cororate)le0el strategy is too aggregated to enable a satis(actory
understanding o( strategic resonses to en0iron1ental in(luences 4hile (unctional le0el
strategies rarely indicate a strategic resonse on their o4n. =t is at the le0el o( business
strategy that the 1aority o( research has (ocussed on, largely as business)le0el strategies
deict the 1ar5et orientations adoted by organisations in their chosen industry sectors as
4ell as re(lect organisational er(or1ance. Accordingly, any eEa1ination o( strategic
#
orientation and its i1act on cororate er(or1ance should, in the (irst instance, (ocus on
business le0el strategies. Ho4e0er, s1all and 1ediu1 si?ed (ir1s S*+s di((er
1ar5edly (ro1 large (ir1s. =ndeed, 4e contend that the distinction bet4een cororate and
business le0el strategies is not al4ays clear cut and in 1any cases the business strategy is
also the cororate strategy. Accordingly, this aer (ocuses on generic strategies that
tyi(y the beha0iour o( the (ir1. Generic strategies are generally described in ter1s o(
substitutes, and 1ar5et entry, 4hich all contribute to 1ar5et attracti0eness. =n addition,
this aroach is consistent 4ith contingency theory 4hich osits that the en0iron1ent,
1anagers, and organisational (actors all lay a role in deter1ining strategic direction.
2ontingency theory resu1es that the ability o( 1anagers to in(luence organisational
outco1e is restricted "*eindl, et al, %/;& by en0iron1ental (actors "Fin5elstein and
Boyd, %//;& and organisational (actors "2arenter and Golden, %//9&. 6he otions are
1any and by selecting the 1eans o( adatation, 1anage1ent eEerts so1e in(luence on
the organisational outco1e "6ho1as and Ra1as4a1y, %//-&. 6he e((ecti0eness o( the
adati0e resonse is deendent on the (it bet4een the resonse and the en0iron1ental
8
de1ands "Ha1bric5, %/;:C ee and *iller, %//-&. 6his reuires rele0ant in(or1ation on
changes in the en0iron1ent and an assess1ent o( conseuences o( alternati0e resonses
"Astley and an de en, %/;:&. 6he use o( contingency theory to underin Fig. % is
articularly aroriate (or S*+s as they are ore 0ulnerable to the e((ects o( the
en0iron1ent, are less able to control the en0iron1ent, and their sur0i0al deends on ho4
they interact 4ith the en0iron1ent "’A1boise and *uldo4ney, %/;;&. Hence,
contingency theory ro0ides the do1inant theoretical (ra1e4or5 to underin this
aroach. Accordingly, the study asserts that the selection o( grand strategies deends on
t4o criteria, the (ir1s’ osition and 1ar5et attracti0eness.
Fig. % here.
6yologies o( generic strategies ha0e recei0ed signi(icant attention in the literature "see
(or eEa1le, *iles and Sno4, %/9;C !orter, %/;$&. Ho4e0er, the testing o( these
tyologies (ocuses on larger (ir1s in the United States 4ith an e1hasis on clari(ying thestrategy)er(or1ance relationshi. 6he literature uses both the *iles and Sno4 "%/9;&
and !orter "%/;$& tyologies. >hile the t4o aroaches eEhibit si1ilarities, Ithe t4o
tyologies are di((erent, each stressing so1e4hat di((erent asects o( business le0elstrategyJ "Sege0, %/;/&. Follo4ing a nu1ber o( (ocus grou discussions, both tyologies
4ere discounted as being too restricti0e (or S*+s. =n !orter’s "%/;$& 1odel, a (ocus
strategy is the only real choice oen to S*+s, 4hereas in the case o( *iles and Sno4’s"%/9;& 1odel, 1anaging directors (eel that in choosing a strategic orientation, they 4ere
being IcorralledJ into being classi(ied as rosectors or de(enders. Accordingly, this
study see5s a 4ider ranging tyology that could ta5e on board strategic orientation in a
1ore ractical and (ocused 4ayC hence(orth, it (ollo4s !earce and Robinson’s grandstrategy aroach.
6his aer is structured as (ollo4s the literature re0ie4 describes the changing 1ar5eten0iron1ent, S*+s and strategic lanning, S*+s and lanning (or1ality, 1ar5et
conditions and organi?ational er(or1ance. 6he second section highlights the
1ethodology including the sa1ling 1ethod and construction o( 0ariables. 6he thirdsection sho4s the e1irical (indings and econo1etric 1ethods. Finally, the study
concludes, outlines the li1itations and suggests a0enues (or (urther research.
0/ Literature revie1
Changing Market Environment and Strategic Thrust
6he literature ac5no4ledges and docu1ents the changing 1ar5et en0iron1ent. For
eEa1le, ohnson and Greening "%///, .-8& strongly contend that Istrategic decision
1a5ers in the %//$s ha0e seen the e1ergence o( a hyerco1etiti0e global 1ar5et lace.J Arguably 4ith the #$$; sub)ri1e crisis, the global 1ar5et lace has beco1e
1ore co1leE than e0er be(ore. Ho4e0er, 4hile re0ious research has little doubt on the
changing 1ar5et en0iron1ents, straight(or4ard solutions (or business are di((icult to
deri0e. =ndeed, in uggling 4ith the (actors needed to (ace the ne4 co1etiti0een0iron1ent, so1e (ir1s succeed 4hile others (ail. 6he uestion as to 4hy this haens
has taEed the 1inds o( strategists and researchers (or so1e ti1e. Arguably oor
er(or1ance results (ro1 the (ailure to recogni?e the i1ortance o( eEternal (actors or the(ailure to 1aEi1i?e the bene(its o( internal resources. 6his 1eans that the rearation,
de0elo1ent and deloy1ent o( strategic thrust is crucial to enhance the chances o(
success. 6his is consistent 4ith the contention by Ki1 and *auborgne "%//9& that thedi((erence in er(or1ance bet4een high gro4th (ir1s and their less success(ul
co1etitors lies in their resecti0e aroaches to strategy. =n doing so, the degree o(
e((ecti0eness is enhanced 4ith the degree o( align1ent o( organi?ational strategy 4ith the
(ir1’s eEternal en0iron1ent "see Ha1bric5, %/;:C *iles and Sno4, %/9;&.
=n addition, the literature suorts the long)ter1 nature o( strategic thrust. For instance,
FoE)>ol(gra11, Boal and Hunt "%//;& state that organi?ations tyically con0ergearound a re0ailing generic strategic thrust. =t is there(ore reasonable to suggest that a
holistic aroach that ac5no4ledges the generic strategic direction o( the (ir1 can be
used to deter1ine the otential acti0ities (or co1etiti0e ad0antage. 6he basis o( thisthin5ing is the ro0ision o( generic or grand strategic choices to (ir1s, each o((ering the
5ey to gain, attain or regain sustainable co1etiti0e ad0antage. !earce and Robinson
"#$$, . #$$& argue that general consensus eEists on the need (or generic strategies thatIro0ide basic direction (or strategic actionsJ in order to achie0e long)ter1 business
obecti0es. 6hey describe grand strategies as Iindicating the ti1e eriod o0er 4hich long)
range obecti0es are to be achie0edJ. Accordingly, grand strategies are the o0erall dri0ero( strategic actionsC ho4e0er, using the concet o( grand strategies reuires caution as
1any (ir1s 1ay oerate in 1ore than one en0iron1ent or indeed ha0e di((erent
interretations or ercetions o( an en0iron1ent "see a(t and >eic5, %/;8&. Ho4e0er to
date, little research has been carried out on the strategic thrust o( S*+s.
SMEs and Strategic Planning
6he literature suggests that S*+s are o(ten seen as s1aller 0ersions o( larger (ir1s "see
O’Neill and uc5er, %/;-C Bradburd and Ross, %/;/& 4ith resultant ad0antages as 4ell
as disad0antages. ennings and Bea0er "%//9& contend that the search (or co1etiti0ead0antage in 1any S*+s is accidental rather than relanned as S*+s are s1aller in si?e
and scoe and ha0e (e4er resources co1ared 4ith larger (ir1s. Ho4e0er, others argue
that s1aller (ir1s ha0e greater (leEibility and roensity to inno0ate e((ecti0ely
co1ared 4ith larger (ir1s desite their resource constraints D >einrauch et al "%//%&.Accordingly, strategic thrust is esecially i1ortant (or S*+s due to their higher degree
o( 0ulnerability "Bruderl and Schussler, %//$&, 4here the strategy 1a5ing rocesses hel
the 1anagers o( these (ir1s to a0oid or 1ini1i?e obstacles to co1etiti0e ad0antage"Ara1 and 2o4an, %//$&. 6he relationshi bet4een strategic lanning and the
er(or1ance o( S*+s is borne out by the literature "e.g. Brac5er and !earson, %/;-C
Olson and Bo5or, %//C Kargar and !arnell, %//-&.
-
Atte1ts so (ar to establish a generic de(inition o( s1all and 1ediu1 si?ed (ir1s "S*+s&
(ocus on (inancial and e1loy1ent si?e criteria, 4ith each atte1t dra4ing its o4n critics
"see O’Regan, #$$8&. Ho4e0er, the 1ore co11only acceted de(inition is that roounded by the +uroean 2o11ission "%//-& based on less than #$ e1loyees. =t
should be noted that the 1aority o( re0ious studies used 0arying de(initions ranging
(ro1 $ to #$$$ e1loyees, 4ith 1ost studies de(ining (ir1s e1loying u to $$e1loyees as s1all "e.g. *cKiernan and *orris, %//8&.
=n any e0ent, re0ious research on strategic orientations did not incororate si?e as an
eElanatory 0ariable "see Ghobadian et al %//;&. Only a0ig "%/;-& eEa1ines theeEistence o( *iles and Sno4’s (our strategic orientations 4ithin the conteEt o( s1all
1anu(acturing (ir1s in aarel, (oundry and (abricated 1etal roducts industries. His
results are encouraging and contribute to the understanding o( the strategic 1anage1ent
o( s1all (ir1s. Ho4e0er, the *iles and Sno4 tyology (ocuses on three 1ain strategictyes D de(ender, rosector or analy?er, 4hereas !earce @ Robinson’s grand strategies
are 1ore co1rehensi0e and relate to strategies ursued rather than strategic orientation.
>e 4ere unable to locate any study that eEa1ined the use o( grand strategies in S*+s.Accordingly, this led us to deri0e the (ollo4ing research uestions
R1 What are the principal grand strategies, if any, used by manufacturing small firms?,
R2 o firms in engineering and electronics use different strategies?,
!2erating "nvironment
As +isenhardt and *artin "#$$$, .%%$& ointed out, (ir1s in less dyna1icen0iron1ents can enact Idetailed, stable rocesses 4ith redictable outco1esJ that are
consistent 4ith the (or1ali?ed lanning aroach. Ho4e0er, the oerating en0iron1ent is
(ar (ro1 stable (or 1ost (ir1s. Follo4ing *iller "%/;;&, this study (ocuses on narro4lyde(ined arts o( the en0iron1ent rather than on o0erall industry ara1eters because
1anagers select seci(ic 1ar5et seg1ents and custo1ers (or attention. 6he (or1er can
only be gauged by assessing 1anagers’ ercetion o( their actual target 1ar5ets "seeess and Beard, %/;8&, as industry 4ide statistics that could ser0e this urose are not
a0ailable "see *iller, %/;;&. !ercei0ed 1easures ha0e the strongest association 4ith
business strategy, since strategists tend to act on their ercetions "see *iller and Friesen,
%/;8&. Arguably, (ir1s that ercei0e their oerating en0iron1ents to be turbulent ordyna1ic 1ight ursue a 1ar5et tye strategy. =n this case, ee and *iller "%//-&
highlight the i1ortance o( Io((erings rele0ant and attracti0e in a changing settingJ. =n
addition, (ir1s adoting this aroach are li5ely to also in0est in research andde0elo1ent as 4ell as 1ar5eting "see Ha1bric5, %/;:&. 6his suggests that (ir1s are
li5ely to adot a co1bination o( grand strategies rather than one grand strategic aroach.
6he literature also suggests that (ir1s ercei0ing their oerating en0iron1ent to be stable1ight (ocus on the e((iciency based grand strategy "see Ha1bric5, %/;:C ee and *iller,
%//-&. =n addition, auch and Osborn "%/;%, . 8/#& contend that Ithe robability o(
organi?ational sur0i0al increases as the congruence o( en0iron1ental, conteEtual, and
structural co1leEity increasesJ.
9
All (ir1s, e0en in the sa1e industry grouing, do not resond to the oerating
en0iron1ent in the sa1e 4ay. For eEa1le, so1e (ir1s 1ay Ianchor their reactions ri1arily to the beha0ior o( other (ir1s that are strategically si1ilar to the1J "Garcia)
!ont and Nohria, #$$#&. Others 1ay adot a 1ore indeendent stance co1rising 0arious
aroaches. 6he resonses to the oerating en0iron1ent can be categori?ed according tothe strategic orientation o( each (ir1. =t there(ore (ollo4s that the align1ent o( an
organi?ation’s strategic orientation to its en0iron1ent is o( ara1ount i1ortance (or
success.
6his led us to deri0e the (ollo4ing research uestion
R! oes the competiti"e position and the degree of mar#et attracti"eness affect the
selection of grand strategies?
R$ %s the alignment of grand strategies and percei"ed operating en"ironment associated
with organi&ational performance?
3/ Methodology and research design
As it ro0ed i1ossible to locate a rele0ant data set, and in any e0ent, archi0al 1easures
cannot 1easure internal organi?ational rocesses recisely "Boyd, ess and Rasheed,
%//:&, 4e choose a sel( reorting ostal sur0ey. 6he literature indicates strong suort(or the use o( sel()reorting data collection "Ra1anua1 and en5atra1an, %/;9C !earce
and Robinson, %/;9C *cKiernan and *orris, %//8C Kargar and !arnell, %//-C Shrader,
2hac5o, Herr1ann, and *ul(ord, #$$8&. !ugh, Hic5son, Hinings and 6urner "%/-;&
argue that sel()reorting 1easures are suerior in this tye o( research to alternati0e datacollection 1ethods because they elicit the in(or1ed oinion o( organi?ational insiders.
*anage1ent research uses ercetual 1easures 4idely because they ro0ide an accurate
descrition o( the (ir1 "Hill1an and Kei1, #$$%&. !ercetions eEert a signi(icantin(luence on shaing strategic beha0ior "2hattoadhyay et al. %///C Sanos and iou5as,
#$$%&. !ercetual 1easures ha0e distinct ractical utility, as they roduce the 1ost
recise assess1ent o( conditions 4ithin a (ir1 as 4ell as enhancing the interretabilityand co1arability o( data "yon et al. #$$$&.
6he initial sa1le (or this study consists o( %,$$$ rando1ly selected 1anu(acturing
S*+s oerating in the UK’s engineering and electronics sectorsC thus, the study choosessectors that are high technology orientated. ue to eEcluding (ir1s that do not 1atch the
selection criteria, the e((ecti0e sa1le si?e is 9$# (ir1s. 6he reasons (or (ocusing on the
engineering and electronics sectors are the (ollo4ing (irst, both sectors are econo1icallyand strategically i1ortant. Second, the already large and signi(icant oulation o(
%,$$$ S*+s in both sectors "6=, #$$$&. 6hird, the di((erence bet4een the roduct li(e
cycles o( the t4o sectors, 4hich is a 5ey contingency (actor "Ho(er, %/9&. Fourth,changes in organi?ational categori?ations and<or aradig1s are o(ten established using
S*+s "Kleer, %//-&.
;
6he sa1le 4as selected rando1ly according to sector and si?e band seci(ications using
the +uroean 2o11ission’s +2<6=’s de(inition o( S*+s ) a (ir1 e1loying u to #$
eole. !earce and Robinson "#$$& highlight the need to eElore grand strategies byde0eloing a robust concetual (ra1e4or5 or ideally by conducting sound e1irical
studies based on such a (ra1e4or5. Although so1e sound e1irical studies ha0e been
conducted in recent years on grand strategies, e1irical studies on high technology S*+sin articular are lac5ing. 6he strategies 4ere ta5en (ro1 the grand strategies de0ised by
!earce et al. "%/;9& 4ith resondents being as5ed to select the strategy that best described
their o0erall strategic orientation.
6he contacts resulted in %/8 0alid resonses ) a #9 ercent resonse rate. 6his resonse is
relati0ely high as tyical resonse rates (or studies addressing strategic issues are in the
region o( %$)%# er cent "Gelet5anyc?, %//9C Koch and *cGrath, %//-&. 2ontact rior tothe disatch o( the uestionnaire and (ollo4 u calls robably account (or the high
resonse. 6he otential i1act o( non)resonse bias 4as assessed by (irst contacting all
non)resondents in0iting the1 to ans4er a li1ited nu1ber o( uestions concerned 4iththe le0el o( e1hasis laced on strategic thrust. Second, to analy?e sa1ling di((erences,
6)tests co1are the 1eans (or the sa1le o( #- 2+Os 4ho articiated in the short
telehone sur0ey 4ith the 1eans (or the 1ain sa1le, and di((erences are statisticallyinsigni(icant.
>e used 6)tests to eEa1ine the di((erence bet4een early and late in(or1ants’ resonse to
5ey uestions. 6his ro0ides an e((ecti0e test (or assessing non)resonse bias because late
resondents are li5ely to resond in a 1anner si1ilar to non)resondents "Ar1strong and
O0erton, %/99C a1bert and Harrington, %//$&. 6he analysis suggests that non)resonse
is not a serious roble1 and should not a((ect conclusions. Finally, 4e too5 1easures to
1ini1i?e 2o11on 1ethod 0ariance "2*&. 2* re(ers to the a1ount o( surious
co0ariance shared a1ong 0ariables because o( the co11on 1ethod used in collecting
data "Buc5ley et al. %//$&. 6he literature suggests that sel()reorting sur0eys in0ol0ing a
single resondent 1ay be suscetible to 2* "Ke1ery and unla %/;-C indell and
>hitney #$$%&. 6he constructs used in this study reuired the resondents to reort on
discrete e0ents reducing the li5elihood o( distorted sel()reorts and < or socially desirable
resonses. Hence, the 2* roble1 is 1ini1ised to a large eEtend. >e also used the
one (actor test roosed by Har1an "%/-9& that o((ers a statistical rocedure (or testing
the 1agnitude o( otential 2* roble1s.
4/ "m2irical analysis
/
6able : highlights the grand strategies (a0ored by S*+s and indicates that roduct
de0elo1ent, 1ar5et de0elo1ent and inno0ation are ro1inent generic strategies used.
Need a bit 1ore here Arguably the 1aority o( S*+s ai1 to deli0er inno0ati0e and high)
uality roducts, 4ith 1any tending to concentrate on a single roduct, single 1ar5et and
a single do1inant technology. 2ororate le0el strategies related to ort(olio 1anage1ent
are not at the heart o( S*+s’ strategic thin5ing, 4hich is, arguably, due to their roduct,
geograhical and organi?ational concentration.
6able : here.
ue to ordered data, na1ely 0alues (ro1 % to indicating the degree o( i1ortance to the
indi0idual, linear regression 1odels (ail in analy?ing ran5ings, as they treat the di((erence
bet4een 8 and the sa1e as bet4een % and #. =n (act, di((erences bet4een categories
cannot be interreted in a linear 4ay, as they reresent di((erences in ran5ings and not
continuous 0ariables. Hence(orth, to account (or sel()anchoring scales, ordered logit and
robit 1odels reresent the best econo1etric 1ethod "Pa0oina and *c+l0ey, %/9&.
Besides using ordered logit 1odels instead o( linear regressions, ordinal le0el data
reuire ran5 correlation coe((icients 4hen analy?ing the interrelation bet4een t4o grand
strategies. 6he Sear1an’s ran5 correlation and Kendall’s "%/:;& 1easure are both non)
ara1etric esti1ators and do not reuire a linear relationshi bet4een the t4o tested
0ariablesC hence, they ro0ide correct esti1ates (or the correlation bet4een resonses.
Kendall’s "%/:;& 1easure is suerior in 1ediu1 and s1all si?ed sa1les. Stars indicate
statistical signi(icance on the // ercent le0el o( con(idence and are based on Bon(erroni