"Recently, research on paradoxical strategies is receiving considerable attention
from both researchers and practitioners. The value of paradoxical strategies is
currently considered critical in increasing firm performance and winning in the
competitive dynamic landscape, which is characterized by uncertainty and rapid
changes in the industry and business environment (Barney and Hesterly, 2006). Such
perceived environmental characteristics require firm to apply paradoxical strategies;
combining strategic flexibility and strategic consistency (Pamell, 1994).
This study addresses four main questions. First, what is the effect of strategic
flexibility on Erm performance. Second, what is the effect of strategic consistency on
firm performance. Third, what is the effect of combining strategic flexibility and
strategic consistency on firm performance. Fourth, what are the contingent effects of
perceived environmental uncertainty on the relationship between paradoxical
strategies and firm performance. This study conceprualizes the application of
paradoxical strategies as a set of capabilities that enable an organization not only
adapt to changing environmental conditions, but also to maintain current strategies
and actions for a considerable period of time.
Recognizing the broad nature of strategic flexibility, it is measured in terms of
pre-emptive moves, exploitative moves, protective moves, and corrective moves.
Strategic consistency is measured in terms of proactive consistency and reactive
consistency. Perceived environment is measured in terms of munificence, dynamism,
and complexity. Overall firm perfonnance is measured in terms of financial
performance and strategic performance, among others are profit, profitability, income,
market share, position in the industry, and customer loyalty.
A survey was conducted in the Indonesian banking industry to measure the
degree of perceived environmental uncertainty, the level of strategic flexibility and
strategic consistency, and the resulting firm performance. Questionnaires were
distributed to 131 CEOs or members of top management team of commercial banks
(including sharia banks) and the 59 retumed responses were analyzed to test
hypotheses.
The results indicate that strategic flexibility has positive effect on bank
performance, while strategic consistency does not have positive effect on bank
performance. In terms of combining these two paradoxical strategies, the results of
this study conhnn that the effect of strategic flexibility on bank performance depends
on strategic consistency and/or perceived environment. Contrary to expectation of this
study, the effect of strategic consistency on bank performance insignificantly depends
on perceived environment.
This study makes several important contributions to growing literature on
paradoxical strategies and strategic management discipline. First, this study is one of
limited researches on the effect of paradoxical strategies on firm performance. It
examines the effect of combining paradoxical strategies on fum performance with
considering perceived environmental uncertainty as the antecedent. Second, it also
fills in the gap in previous study on managing paradoxes in service operations setting
at the corporate/strategic level. Third, this study develops a set of measures of
strategic consistency and strategic perfomrance that captures building on prior
concepts.
The fundings in this study offer inputs for the development of banking industry
in Indonesia. For bank management, to sustain its growth, banks should increase its infomation technology capabilities, which are mainly supported by flexible systems
and knowledgeable people. For the banking regulator and the government agency
alike, the inputs are as follows: carry out the detailed research on the impact of
regulation and govemment policy on bank flexibility; take Bank NTT, Bank Jatim,
and Bank Sumsel as samples for other regional development banks as the agile banks
with high performance; create regulation and policy to drive innovative banking
product development; encourage the commercial banks to undertake information
technology investments to boost innovative financial products and services; create
speciiic regulation about outsourcing service provider; and encourage further
development of Internet banking services by improving system infrastructure
environment, enabling policy and regulatory environment for this business, and
building up a comprehensive e-security public policy framework."
Fakultas Ekonomi dan Bisnis Universitas Indonesia, 2006
