A study of strategic actions is an important area of research in strategic management. Strategic actions form patterns to determine a company's strategy (Mintzberg, 1973). Due to environmental uncertainty, strategic planning blueprints are not reliable indicators of a company's strategic actions, and emergent actions that are not deliberately planned may have critical impact on performance (Mintzberg and Waters, 1985). Ironically, however, strategic actions have been studied less frequently than competitive actions which have been often defined as the mix of strategic and tactical actions (e.g., Ferrier, 2001; Ferrier and Lee, 2002; Ferrier et al., 1999; Miller and Chen, 1996). The latter emphasis is rooted in the interest to explore competitive dynamics that reflect actions and reactions by rivals (D'Aveni, 1994; Rindova et al., 2010; Smith et al., 2001). This research stream has focused on the antecedents and consequences of competitive actions (e.g., Ferrier and Lee, 2002; Miller and Chen, 1996). There has been limited interest to date in separating out tactical and strategic actions, and more on the actions and response of competitors.

Yet the value in studying strategic actions is manifold. The inconclusive findings regarding the models to predict competitive actions have been attributed to a failure to differentiate between tactical and strategic actions (Miller and Chen, 1994). The difference between these action types is substantial. Strategic actions involve large resource commitments, are irreversible, and have long-term consequences; tactical actions, in contrast, involve more modest resource commitments, are feasible to shift and realign, and have short-term effects. Companies undertake a relatively large number of tactical actions and they learn effective combinations and patterns of these actions over time. Poor performance, in particular, triggers tactical changes, such as changes in pricing strategy or a new advertising campaign, which are easy to undertake, are not usually subject to political resistance, and do not threaten the resources (Miller and Ghen, 1994). However, if the tactical actions flow from a wrong strategy, negative performance implications would be warranted. Therefore, focus on strategic actions would be essential to evaluate the overall effectiveness of a company's strategy.

Prior studies have primarily relied on prospect theory and threat-rigidity theory to formulate their hypotheses involving the effects of past performance. According to prospect theory, poor performance stimulates action intensity and good performance causes complacency (Kahneman and Tversky, 1979). Ferrier (2001) argued, in line with prospect theory, that good past performance negatively affects a firm's motivation to compete aggressively and poor performance will cause firms to compete aggressively. These theories are not without shortcomings. Prospect theory is originally formulated to predict individual behavior and does not take into account some of the complexities of organizations (Shimizu, 2007; Thaler and Johnson, 1990; Ruefli et al., 1999). Indeed, Bromiley (2010) has recently argued that prospect theory is not useful as a firm level tool for strategic management questions.

This study seeks to address these two key shortcomings of prior work in competitive dynamics. First, it will focus solely on strategic actions and exclude tactical actions from the analysis. In this manner, a more clear understanding of the role of past performance on the longer term actions or strategic aggressiveness of the firm is obtained. Second, this study proposes a new perspective called "gain-thrust schema" as an appropriate firm level alternative to prospect theory. In contrast to prospect theory, in the gain-thrust schema, strategic aggressiveness becomes susceptible to forces of momentum and is likely to result in excessive levels. Finally, the study argues that effective management of the core stakeholders would moderate aggressive tendencies to gain momentum and reach excessive levels. Several hypotheses are developed and empirically tested using a broad based sample of firms. Then the findings are analyzed and the paper concludes with a discussion of results and implications.

CONCEPTUAL BACKGROUND

Despite merits in studying strategic actions, research on strategic actions which is the focus here, has received less attention than competitive actions. Studies in the competitive dynamics stream conceptualize strategy as competitive action, (Smith et al., 1992; Smith et al., 2001). Competitive action is considered central to business strategy and competitive positioning (Mintzberg, 1978; Porter, 1980; Ghen et al., 1992). Also, competitive actions among industry incumbents are considered as the fundamental core of competitive conduct in industries (Porter, 1980; Gaves, 1984). A company's competitive actions have been studied in various ways. For instance, the unit of analysis in one approach is comprised of numbers of actions which is labeled action volume (Young et al., 1996; Ferrier et al., 1999). Variants to this conceptualization include competitive action aggressiveness which refers to a large volume of actions carried out and a high variety or dissimilarity of actions undertaken in a given time period (Ferrier et al, 1999; Miller and Ghen, 1996; Young et al, 1996).

A branch of the research stream on competitive actions has focused on competitive aggressiveness, defined as a higher number and a wider variety of mixed strategic and tactical actions. Past performance has been often included in a number of other studies as an antecedent variable to predict competitive actions (Ferrier, 2001; Miller and Chen, 1994, 1996; Ghen et al., 2010). As Table 1 shows, most studies that have examined these effects have found the hypothesized relationships to be insignificant. However, Miller and Ghen's (1996) study is an exception in this stream of research that has examined the effects of strategic and tactical actions separately. Their study reveals a positive relationship between market growth and strategic action intensity as they predicted, and a positive relationship between past performance and strategic action intensity, contrary to their prediction of an insignificant relationship. They argue that combining strategic and tactical actions is, in part, responsible for the inconclusive findings.

In today's fast paced, highly competitive business landscape, strategic aggressiveness is widespread. Aggressiveness in competitive actions has been described as a company's propensity "to directly and intensely challenge its competitors to achieve entry or improve its competitive position" (Lumpkin and Dess, 1996: 148). In the competitive action literature, it is generally believed that the higher the number of competitive actions, the greater the aggressiveness (D'Aveni, 1994; Young et al., 1996). It is also conceived as the extent to which a sequence of actions is composed of actions of many different types (Ferrier and Lee, 2002). This concept is similar to the complexity of a firm's entire repertoire of competitive actions (Ferrier et al., 1999). In a similar vein, strategic action aggressiveness is defined in this study as the extent to which a firm carries out a large number of strategic actions and/or many different types of strategic actions.

In this study, strategic action aggressiveness is conceptualized to reflect the intense pursuit of strategic opportunities to gain, protect, and reinforce the company's competitive advantage and economic rents. This is characterized as an opportunity driven pursuit and a continuous focus on improving the magnitude or intensity of a firm's strategic position (Ginsberg, 1988). It should be noted that while strategic actions are of more limited quantity than tactical actions, there is still an assumption that the firm is able to devote resources to such actions when it deems them required. A key principle in dynamic competitive interaction is to move quickly and aggressively to preemptively beat rivals, which, in turn, slows the rivals' ability to respond (Ghen et al, 2010; D'Aveni, 1994; Smith et al, 1992; Ferrier and Lee, 2002). Companies that pursue an aggressive mode of competitive actions tend to outperform others that are less active (D'Aveni, 1994; Young et al, 1996). However, the aggressive pattern of strategic actions is not without a caveat for negative performance consequences. It has been convincingly argued in the literature that most of the actual strategic decisionmaking takes place outside formal planning systems (FPS) (e.g., King, 1983; Sinha, 1990). They, therefore, typically involve limited decision comprehensiveness/ rationality (Frederickson and Mitchell, 1984) which makes them susceptible to flawed formulations and forces of momentum in dysfunctional trajectories as elaborated below.

HYPOTHESES

Gain -Thrust Schema

Gain-thrust schema is management's shared mental framework that underlies the nature and intensity of strategic actions in the context of seeking and sustaining competitive advantage. It represents top management's collective understanding and beliefs regarding how to manage the requirements for achieving and sustaining competitive advantage. Specifically, it reflects pressures to preemptively secure new competitive advantages and pressures that arise due to anticipating competitors' moves to close the gap between their performance and others. This is a form of proactive stance described by Jauch and Glueck (1988) as one in which top management acts before they are forced to react to changes in the competitive environment. Past research emphasizes the prevalence of the conditions that give rise to the managerial gain-thrust schema. Today's increasingly competitive business environment requires that companies find new and improved strategies for achieving superior financial performance in a business landscape where technological advances have driven down costs and made it easier to imitate new goods and services introduced by the competitors.

Prediction of strategic action in the context of gain-thrust schema conflicts with arguments that underlie prospect theory. Past performance reveals the discrepancies between companies' goals and actual performance which, in turn, influence the management's behavior or strategic change (Hitt et al., 2001). Prospect theory makes the case that an individual's risk propensity changes according to achieved performance relative to target performance (Kahneman and Tversky, 1979; March and Shapira, 1987). When individuals are near or above target performance they tend to be risk-averse, but when they are below target they tend to become risk-seeking. According to prospect theory, successful past performance encourages complacency and a reliance on pursuing past strategies that have produced good results, and thereby inhibiting competitive action and change (Lant et al., 1992; Miller, 1993; Miller and Ghen, 1994). However, application of prospect theory to organizational setting has been criticized on several grounds. Prospect theory was originally formulated to predict individual behavior (Edwards, 1996). Bromiley et al. (2001) emphasized that prospect theory is often simplistically overextended to organizationlevel research. More rigorous application of prospect theory at the level of an organization would require examining the theory's assumptions and incorporating the relevant factors at the application context, such as resource availability within an organization (House et al., 1995; Ocasio, 1995). Various complexities reflected in organizations such as the availability of slack resources complicate the underlying arguments in prospect theory.

Another drawback for the applicability of the prospect theory to an organizational context is its failure to account for the top management's gain- thrust schema and dynamic nature of markets. Prediction by prospect theory that good performance leads to complacent behavior is a present t ime -oriented, static conceptualization. The underlying assumptions in this perspective are not consistent with the fast paced and challenging competitive realities and with shareholder pressures on companies to act more aggressively. Managers of good performing companies can become risk-seeking due to high expectations for future growth by investors who extrapolate previous growth rates into the future (La Porta, 1996; Lakonishok et al., 1994), and the performance target and growth expectations may keep increasing to increasingly higher levels. Owing largely to a greater emphasis on short-term performance and hypercompetition, managers increasingly use stock returns as an important decisionmaking barometer (Bruckner et al., 1999). In this vein, from the viewpoint of top management's gain-thrust schema, there is more risk involved in a passive stance to protect current profits than to pursue anticipatory strategic actions. Not only may it take aggressive strategies to gain competitive advantage but equally aggressive moves may be necessary to sustain it.

Given the temporary nature of most competitive advantages, new moves might be necessary in anticipation of competitor's retaliation. MacMillan (1988) proposes a host of anticipatory strategic initiatives and emphasizes their importance due to the fact that most competitive advantages are temporary. A delay in taking these initiatives may miss the strategic window and result in loss of the firm's strategic control of the industry (MacMillan, 1988). Furthermore, good performance reinforces aggressiveness by creating a fertile platform to translate gain-thrust schema into action. It reinforces the level of slack resources, which allows a company to continue to pursue risky behaviors (Singh, 1986). Positive returns on investments allow a company to access greater levels of financial resources (Kuratko and Hodgetts, 2007). It also gives managers higher confidence and support from the important constituents to undertake bolder moves.

It is conceivable, however, that poor performance may promote higher volume of new competitive actions with the aim to improve performance since a large proportion of competitive actions are tactical moves that require little or modest resource commitments (e.g., changes in pricing and advertising campaigns). The effect of poor performance on the strategic actions, in contrast, would be constraining since strategic actions require more substantial resource commitments. As financial slack is compromised, companies are likely to concentrate on existing product competencies which involve product variants with minimal improvements and incremental repositioning (Levinthal and March, 1993). Based on the gain-thrust schema, the following hypotheses are formulated:

Hypothesis Ia: The relationship between firm performance of the recent past and strategic action intensity is positive.

Hypothesis Ib: The relationship between firm performance of the recent past and strategic action variety is positive.

Core Stakeholder Salience

A company's strategic behavior in the context of the top management's gainthrust schema may lead to excessive aggressiveness. This is reinforced and propelled by the momentum that ensues because "repetition leads to familiarity and patterns of autonomous, adaptive action become embedded within the organization climate" (Lengnick-Hall and Wolff, 1999: 1127). These actions are likely to gain momentum and create a whirlwind of unprofitable outcomes, and in some cases, the ultimate demise of the firm as an ongoing concern. Momentum is defined here as the firm's tendency to increase intensity and variety of past actions particularly in the context of good performance without regard to long-term consequences. Momentum gains traction especially when aggressive strategy initially yields successful results. Several authors have suggested that superior performance is likely to lower the extent to which a company engages in comprehensive and rational decision-making (Gyert and March, 1963; Fredrickson, 1985).

Owing to the gain-thrust schema based momentum, aggressive strategy, provided there is access to needed resources, may continue to manifest despite poor outcomes. This is described as escalating commitment to a failing course of action in the literature (e.g., Bowen, 1987; Brockner, 1992). It involves increased investment in projects or decisions that have led to negative consequences. Also, poor past performance threatens managers' ego and reputation, so they defend their strategic choices by insisting on past actions (Brockner, 1992; Staw et al., 1981). Momentum sometimes manifests during organizational decline. For example, Weitzel and Jonsson (1991) describe the case of retail chain W. T. Grant which increased commitment to its strategy of store expansion, despite repeated feedback that sales per square foot were declining. The company financially deteriorated and filed bankruptcy most likely due to its rigid adherence to the costly and unsuccessful store expansion strategy. Momentum may also manifest on a growth trajectory, but beyond a threshold of market share gains there are greater penalties than rewards for insisting to pursue increasingly higher levels of growth. According to Ghristensen and Raynor (2003), only three out of ten companies achieve successful growth and fewer companies are able to maintain its rate of growth. Escalating commitment to growth can be costly as in the case of AT&T which lost over $50 billion in the course of acquisition frenzy over a ten-year period (Ghristensen and Raynor, 2003).

Mitigating the gain-thrust momentum exuberance may be achieved by a stakeholder perspective. Freeman (1984), who popularized the strategic dimension of the stakeholder theory, states that stakeholders are "any group or individual who can affect or is affected by the achievement of the organization's objectives" (Freeman, 1984: 46). Primary stakeholders, which are often identified as customers, shareholders, employees, and suppliers, reflect high strategic and significance and are those "without whose continuing participation the corporation cannot survive" (Glarkson, 1995: 259). Past research has revealed that companies tend to attach varying degrees of significance to different stakeholders (Waddock and Graves, 1997; Wood, 1991). The prioritization scheme with respect to the stakeholders is referred to as stakeholder salience (Sundaram and Inkpen, 2004; Neubaum and Zahra, 2006).

In this study, core stakeholder salience is defined as the corporate values and management philosophy that dictate balancing the long-term interests of customers, employees, and shareholders. There is unanimous agreement in the literature on the importance of addressing the interests of the three core stakeholder groups (Fassin, 2009). Although some authors included competitors as part of the strategically relevant stakeholders (Greenley et al., 2004), others have eliminated their consideration as part of the core group and view them in a separate group along with the suppliers called "business" (Fassin, 2009). The core stakeholders may be viewed as strategic partners (Harrison and St. John, 1996) and "intimately connected with the practice of business and of value creation" (Freeman, 1984: 43). At the heart of the balanced score card framework popularized by Kaplan and Norton (1996) is the core stakeholders which are viewed to support the company's strategy. Balancing the interests of the core stakeholders requires fine-tuning the dynamic balancing act rather than an attempt to achieve "equality" or "trade-offs" (Cardinal et al., 2004). According to Freeman and McVea, interests of the core stakeholders must be balanced in a "coherent and strategic fashion" (2001: 193).

Freeman and McVea (2001) further suggest that balancing the interests of multiple stakeholders requires a long-term perspective and a set of core values that needs to be incorporated as the basis for strategic decision-making. Focus on balancing the interests of the core stakeholders is a process that inherently reflects long-term orientation because the stakeholders' interests are long-term (Freeman et al., 2004). Long-term orientation, in turn, requires greater decision comprehensiveness (Fredrickson, 1985), ensures strategic consistency, and, therefore, counterbalances the random mode of opportunity-seeking behavior.

It is important to explore the counteracting role of the stakeholder management in excessive strategic aggressiveness because three core logics that underlie contemporary strategies reflect select prioritization of the core stakeholders (Lengnick-Hall and Wolff, 1999): (1) guerilla logic based on the hyper competition model (e.g., D'Aveni, 1994; Chakravarthy, 1997) mainly focuses on creating value for customers; (2) capability logic based on the re sour ce -based view (e.g., Barney, 1991, 1995; Prahalad and Hamel, 1990) prioritizes long-term return to shareholders, and (3) complexity logic (e.g., Senge, 1990; Levy, 1994) concentrates on the interests of the broad business ecosystem community (Lengnick-Hall and Wolff, 1999). A study by AgIe et al. (1999) reveals that shareholders are privileged in the hierarchy of stakeholder salience. It has been often argued that prioritizing the interest of a select stakeholder often manifests at the expense of other stakeholders (Sundaram and Inkpen, 2004). Attempts by many corporations to sub-optimize the interests of shareholders have been criticized on the grounds that stakeholder management is complementary to shareholder value creation and that "the emphasis on shareholder value creation should not be construed as coming at the expense of the interests of other primary stakeholders" (Hulmán and Keim, 2001: 136). Although shareholder value maximizing has been a dominant intellectual paradigm (Alien, 1993), a view that argues the importance of strategically managing the core stakeholders, not just shareholders, has been gaining increasing attention (Freeman, 1984; Mitchell et al., 1997). The foregoing considerations are formalized in the following hypotheses:

Hypothesis 2a: Core stakeholder salience negatively moderates the firm performance of the recent past-strategic action intensity relationship.

Hypothesis 2b: Core stakeholder salience negatively moderates the firm performance of the recent past-strategic action variety relationship.

METHOD

The principle research method in this study is the content analysis of the opening GEO letter in the company annual reports. Content analysis of written documents involves coding words, phrases, and sentences against particular schema of interest, and such analysis of annual reports has been widely used for analyzing strategic decisions of companies (Bowman, 1984). Ginsberg (1988) argues that content analysis is an effective way to explore strategic processes through performing analysis of published histories about firms. In particular, structural content analysis (Jauch et al., 1980) has been used frequently as a predominant method to study competitive actions of a company (Ghen and Hambrick, 1995; Miller and Chen, 1996; Rindova et al., 2010; Smith et al., 2001). Bowman (1978, 1984) suggests that annual reports contain extensive material that permits the use of content analysis. Annual reports are considered a medium to communicate a company's strategy (Diffenbach and Higgins, 1987) and the president's letter to shareholders, in particular, fulfills this objective (Hyland, 1998).

Two MBA students, who have completed a course on strategic management, assisted in the content analysis of the annual reports of the sampled companies. Initially, several iterations with the MBA students were performed for training purposes. As agreement rates approached 90 percent, the primary coders completed the work while the authors were involved as judges to settle disagreements and to ensure consistency.

Sample

The sample consisted of 100 U.S. firms from a representative set of SIG classification codes.1 As a measure of their size, the number of employees ranged from 100 to more than 100,000. Purposive sampling (Kerlinger, 1986; Emory and Cooper, 1991) was used to insure representation of a wide variety of company sizes and industry classifications. Fifty firms were selected from the traditional sectors such as industrial and retail, while 50 firms were pulled from high-tech sectors such as software and pharmaceuticals; both sets contain several different SIG codes. The firms were selected adhering to the criterion that no industry represented more than ten percent of the sample. Each sector is comprised of 25 small and medium sized companies (0-999 employees) and 25 large companies (>1000 employees). This approach to sampling represents an improvement over past research on competitive action that has relied upon samples representing only a single or a few industries, and mainly large companies, as shown in Table 1.

Dependent Variables

In this study, the dependent variables of interest are strategic action intensity and variety. Consistent with past research, content analysis of company annual reports was employed to infer a range of strategic actions. Past studies have used exhaustive and comprehensive lists of competitive actions, defined as a mix of strategic and tactical actions, relevant to specific industries such as the pharmaceutical industry (Offstein and Gnyawali, 2005) and the airline industry (Miller and Ghen, 1994). In this study, strategic actions are the exclusive focus. These strategic actions are identified based on a review of the literature on strategy content. Various combinations of these activities described competitive strategies (Porter, 1981) and strategy archetypes (Miles and Snow, 1978; Karagozoglu and Brown, 1988; Govin and Slevin, 1989).

Based on the above review of the strategy content literature, fourteen strategic actions in three main activity dimensions were identified and labeled as A, B, and G. Dimension A consists of activities that relate to improving operational efficiency (e.g., adoption of new manufacturing technologies, adoption of companywide cost control measures). Dimension B relate to product market improvements vis-à-vis existing business (e.g., investments and activities to improve current products and penetrate current markets). Dimension G activities relate to entering new or related businesses (e.g., investments and activities to develop new products and markets). Also, activities such as joint ventures and strategic alliances (acquisition or merger) were coded based on their underlying objective. If the joint venture or strategic alliance was undertaken to improve operational efficiency, they were coded in Dimension A; to improve customer satisfaction or quality improvements to the existing product, they were coded in Dimension B; to grow market share or to develop a new product(s), they were coded in Dimension G.

The MBA students, who assisted in the content analysis, were given an exhaustive list of sub-activities corresponding to each activity. For example, internationalization, the main activity, could involve the vehicle of exporting (sub-activity) or involve a joint venture with a foreign company (sub-activity), as a method of entry into the foreign market. If the coders encountered a sub-activity that was not present on the list provided, they were instructed to code it in the "other" category and the final decision was made by the authors in these instances. The MBA students recorded actions that closely aligned with the fourteen main activities and a set of sub-activities.

The set of strategic activities and sub-activities, as described above, was used to operationalize the two main dependent variables of interest, strategic action intensity (SAI) and strategic action variety (SAV). The period chosen for study was from 2002 to 2007. During this period, the U.S. economy had been largely free from major economic tumults that could have potentially skewed the results. Previous research operationalized competitive activity as the total number of competitive actions undertaken by a company during a given calendar year (e.g., Young et al., 1996; Ferrier et al., 1999). Similarly, strategie action intensity was measured as the total number of sub-activities that each firm carried out in 2007. High scores indicate that a company aggressively seeks to outperform its rivals.

In past research, competitive action variety was operationalized by adopting Blau's index to compute this variable (Ferrier et al., 1999). Heterogeneity or variety was determined by using the concept of value chain (i.e., inbound logistics, production, outbound logistics, marketing, technology, human resources, infrastructure, and procurement) (Porter, 1985). The actions within the realm of a value chain include tactical measures such as price changes, minor adjustments to functional policies, and logistic reconfigurations in response to competitive dynamics. This study, in contrast, focuses on strategic actions (excludes tactical actions) and the variety is conceptualized as heterogeneity of activities spanning across the three strategy dimensions discussed above.

Consistent with prior studies, the following approach was used to derive a composite measure of strategic variety. First, the ratio was calculated for the number of activities in each of the three main strategic activity dimensions to total number of activities combined in all three dimensions. Then, to account for the weighted distribution of actions carried out across dimensions, each proportion was squared. Finally, the sum of these squared proportions was determined to arrive at the measure for strategic action variety. It should be noted that, based on the algebra involved, a higher value of this sum indicated lower action variety, and therefore, the interpretation of analytical results will be based accordingly.

Independent Variables

Content analysis was used to gain insight about the stakeholder related themes conveyed in the presidents' letters. According to Fiol (1989), CEO's letters in the annual reports communicate the facts about the firm as well as the beliefs about the company and its relationship with the stakeholders. Bowman (1984) notes his observation that GEOs typically spend considerable amount of time outlining the contents of the report. To measure core stakeholder salience, content analysis of the GEO's letters to shareholders of the sampled companies was used. There is a dearth of literature that offers operational definition of stakeholder management. The exceptions include perceptual measures for a firm's orientation towards multiple stakeholders (Greenley et al., 2004; Greenley and Foxall, 1997) and the Kinder, Lydenburg, and Domini (KLD) index as a measure of stakeholder performance (Waddock and Graves, 1997; Hulmán and Keim, 2001). The advantage of using content analysis over the perceptual measures to operationally define core stakeholder salience is that GEOs articulate salience of the core stakeholders on a volitional basis rather than casting a response to a question asked by a researcher. The latter may reflect biases as a GEO may be inclined to convey greater importance to the core stakeholders than it may be actually practiced in the organization. GEOs signal the most important details of a company's strategy and operating philosophy in their letters to shareholders (Bowman, 1984).

GEO letters to shareholders in the annual reports were content analyzed using meta-discourse approach to operationalize the core stakeholder salience. Metadiscourse, in the present context, was used to determine the prioritization of the core stakeholders (shareholders, customers, employees). Meta-discourse analysis, specifically, was instrumental in determining the priority that GEOs attach to the core stakeholders as a group as opposed to the priority they attach to a select stakeholder. Meta-discourse is a linguistic approach to analyze the text from the standpoint of expressive meanings (Halliday, 1973). It focuses on the author's attitude regarding the information provided in the text (Hyland, 1998). It is evaluative in purpose and focuses on the author's expression of attitude and commitment to the statements. Specifically, "attitude markers" and "emphatics" in the context of the GEO's statements were sought (Hyland, 1998) about each of the core stakeholders. Attitude markers, in this study, reflected the GEO's judgments of importance of a stakeholder, and included verbs, modals, and sentence adverbs (Hyland, 1998). Emphatics, such as "it is obvious," "clearly," "definitely," and "I firmly believe," indicated the GEO's confidence, decisiveness, and commanding posture (Hyland, 1998) in relation to the core stakeholders. This variable is coded to reflect prioritization of all three stakeholders, coded "1," or prioritization of less than all three stakeholders, coded "0."

Consistent with prior research, past performance was used as a predictor variable (e.g., Lant et al., 1992; Wiersema and Bantel, 1992). To measure past performance, each company's annual return on assets (ROA: lagged one year) and annual return on equity (ROE: lagged one year) were included. Also included was sales growth rate (SG: lagged one year) as an additional measure due to its importance in shaping future strategic direction (Hopkins and Hopkins, 1997; Brush et al., 2000). Return on Equity and Return on Asset are widely used measures of financial performance (e.g., Venkatraman and Ramanujam, 1986; Schmidt and Fowler, 1990).

Control Variables

Firm size was controlled because the results of numerous studies have indicated that size can systematically influence organizational practices. Smith et al. (1989), for example, found that firm size is an important moderator of the strategy-performance relationship. Consistent with established practice in the literature, company size was measured by taking the natural log of the number of year round, full-time employees (Baum and Wally, 2003). Controls for the industry due to differences in competitive dynamics between traditional and high-tech sectors were also included (Thompson, 1988).

RESULTS AND DISCUSSION

Table 2 exhibits means, standard deviations, and correlations. Not surprisingly, organization size is significantly correlated with both the strategic action intensity and strategic action variety, and the past performance indices except for the sales growth rate. The negative sign with respect to the strategic action variety shows that large companies, due to their longer history, pin down strategies that have worked in the past and are not inclined to experiment with an array of different strategies. It may also be that large companies are often subject to inertia (Dobrev et al., 2003) or competence traps whereby they are unable to change even when it is needed (Levitt and March, 1988). Large organizations have greater access to slack resources which permits higher aggressiveness and risk-taking (Cohen and Klepper, 1996; Sorensen and Stuart, 2000). Larger organizations also tend to exhibit consistent profitability. Size did not correlate significantly with the sales growth rate as large companies usually operate in mature markets.

The correlation results also show that high-technology companies tend to exhibit greater strategic action intensity but less core stakeholder salience. According to the results, high technology companies, not surprisingly, appear to pursue strategies more closely aligned with the guerilla logic (Lengnick-Hall and Wolff, 1999) and show greater proclivity to compromise from a balanced approach to manage the core stakeholders. However, industry did not significantly correlate with the strategic action variety. A conclusion which can be drawn from this result is that relatively more aggressive behavior of the high-technology companies do not appear to manifest through greater variety of strategic actions. This might be interpreted to indicate the forces of momentum set in motion by the gain-thrust schema.

Core stakeholder salience related negatively to strategic action intensity (r= -0.17, p < 0.10). This is consistent with the arguments advanced in this paper regarding the role of core stakeholder salience as an important factor that counteracts excessive aggressiveness. However, core stakeholder salience did not relate to strategic action variety. The relationship is substantively and statistically insignificant (r= 0.02, p > 0.10). This may be interpreted to suggest that in the context of the comprehensive/rational strategic decision-making required to balance the interests of the core stakeholders, strategic decision variety may not be viewed as leading to positive or negative consequences in an end of itself but its effectiveness may be considered as contingent on a host of internal and external factors. A company may pursue dissimilar strategic actions to spread the risks and, thereby, avoid momentum in the same trajectory. It is noteworthy to mention that core stakeholder salience was not related to any of the past performance measures. This finding is consistent with the claim that accounting measures of performance are short-term indices and do not relate to stakeholder management which reflects a long-term horizon (Hulmán and Keim, 2001). The lack of a significant relationship between the stakeholder salience and the measures of past performance alleviate some concerns for multicollinearity problems in the hierarchical analysis used to test the hypotheses.

Results of the hierarchical regression analyses are reported in Table 3. Hypothesis Ia, which predicted a positive relationship between good past performance and strategic action intensity (SAI), is confirmed in Model 1 (ROE: Beta = 0.18, p < 0.05; ROA: Beta = 0.22, p < 0.05; Sales Growth Rate: Beta = 0.25, p < 0.01). This finding lends support to the role of top management's gain-thrust schema in aggressive strategic actions especially in the context of good past performance. This result also supports the contention that prospect theory suffers limitations due to its exclusion of complexities such as resource considerations and dynamic competitive pressures. Results are mixed in testing Hypothesis Ib in Model 2. Past ROA (Beta = 0.20, p < 0.05) results are quite similar to those for SAI and support the hypothesis. However, the effect of past ROE is substantively significant (Beta = 0.11) but not statistically significant (p > 0.10). Further, the past Sales Growth Rate correlates significantly to strategic action variety (Beta = -0.30, p < 0.01). However, the sign of the effect of past Sales Growth Rate is in the opposite direction than the predicted sign. This may mean that in the backdrop of high sales growth in the recent past, top managements may be inclined to pursue similar strategies that they causally link to high most recent Sales Growth. This finding supports the argument that aggressive strategic actions are susceptible to the gain-thrust schema based momentum. The momentum can manifest irrespective of the performance consequences as, Sales Growth Rate negatively correlated with ROE and ROA.

Hypothesis 2a and Hypothesis 2b are tested using hierarchical moderated regression analysis. In order to test for moderation, the moderator variable, core stakeholder salience, is dummy coded, and an interaction term is computed between the dummy coded groups and each continuous causal variable, past ROE, ROA, and Sales Growth Rate. Hypothesis 2a is partially supported in Model 1. The interaction term between salience and ROA is substantively and statistically significant (Beta = 0.16, p < 0.1). Hypothesis 2b is not supported in Model 2. Stakeholder salience has less impact on the variety of strategic actions than it does on the volume of actions.

It appears that core stakeholder salience more significantly counteracts strategic action aggressiveness in regard to the effect of sales growth rate than the effect of other performance measure. Simon (1993) argued that high growth rates cannot be maintained. Ghristenson and Raynor (2003) also noted the difficulty in achieving and maintaining high growth rates. Aggressive efforts to achieve high growth rates may be subject to momentum and to negative performance consequences (Ghristenson and Raynor, 2003). Venkatraman (1989) found that strategic orientation that emphasizes market share seeking is related to riskiness. Bowman (1984) found that the risk-return relationship in firms is negative in contrast with the positive relationship suggested by economic and finance theory. Bowman (1978, 1984) empirically studied the withinindustry relationship between risk and return for several industries and found that the relationship was negative in most of them.

In all, the findings indicate the importance of differentiating between strategic and tactical actions. By focusing here on only strategic actions, strong support for the gain-thrust schema of senior management is found for firm performance on intensity of strategic actions. The gain-thrust schema is also found to support strategic action variety at least for some measures of firm performance. The results provide strong evidence that good performance fuels strategic aggressiveness contrary to the assumptions that underlie prospect theory.

Another key finding is that companies that balance salience of the core stakeholders are able to counteract tendencies for excessively aggressive strategic actions. The implication of this finding is quite significant because contemporary strategy logics reflect select prioritization rather than balanced prioritization of the core stakeholders (Lengnick-Hall and Wo Iff, 1999). Therefore, the strategies formulated based on these core logics will have tendencies for excessive aggressiveness and momentum short of counteracting mechanisms. Freeman et al. (2004) have linked effective stakeholder management to the outstanding performances by such companies as J&J, eBay, Google, Lincoln Electric, and AES. Similarly, the hall of fame performers studied by Gollins (2001) do not prioritize shareholder value maximization as the driver of their strategy (Freeman et al., 2004).

The importance of inertial forces affecting strategic actions has been recognized in the literature in that periods of changes in magnitude (i.e., volume of actions) are interspersed with periods of discontinuous changes (Tushman and Romanelli, 1985; Mintzberg and Waters, 1982). Tushman and Romanelli (1985) suggest that successful companies develop the correct balance of stability and change; these organizations will reorient when environmental conditions warrant such a change. However, due to top managements' gain-thrust schema, finding a correct balance between stability and change may be challenging and that exorbitant strategic actions may cause prolonged poor results that may ultimately threaten a company's long-term viability.

The implications of this study are subject to several limitations. Although the results corroborate the arguments advanced in this study ex post, not knowing exactly how top managers interpreted past performance results may be of concern. They may have regarded poor performance results as temporary or good performance results as lower than their aspirations. Unfortunately, it is not possible to determine aspirational performance targets using content analysis of annual reports. Due to extensive time requirements, multi-year measures are not used and some of the findings may have been the result of a one year anomaly. Also, it is possible that GEOs of some of the sampled companies may not have mentioned one or more of the core stakeholders in their letters to shareholders, due to other pressing issues that needed to be communicated, despite their salience in the organization. Therefore, some of the companies in the sample may have been erroneously coded to reflect absence of core stakeholder salience.

CONCLUSION

Notwithstanding the limitations cited above, this study makes several contributions to the literature. It highlights the importance of focusing exclusively on strategic actions as opposed to past research that has explored the combined effect of strategic and tactical actions (e.g., Ferrier and Lee, 2002). It has demonstrated the role of the gain-thrust schema in shaping aggressive strategic actions vis-à-vis good past performance. In this connection, it has also shown shortcomings of the prospect theory in explaining strategic actions. Furthermore, it has demonstrated that aggressive patterns of strategic actions can be tempered by effectively managing the relationships with core stakeholders. Without the counterbalancing measures such as effective stakeholder management, aggressive strategic patterns potentially gain momentum and may threaten the viability of the company.

Future research should combine content analysis and perceptual measures to test the arguments advanced in this study. It would be quite useful to operationally define top management's gain-thrust schema via perceptual measures. As the value of longitudinal studies in strategic management and organizational research has been often stressed, such attempts would also be very valuable for this research area particularly as relates to GEO tenure in this arena. Another fruitful extension of this study might be to include environmental variables in the theoretical model. It would be particularly valuable to explore the moderating role of the environmental variables in the relationship between strategic aggressiveness and performance consequences. Ginsberg (1988) suggested that selection of a small number of variables has the advantage of simplifying data gathering and model building, but it also increases the risk of specification error. In this sense, the present study may be viewed as a stepping stone to add more pertinent variables to broaden the perspective.

1 A full list of firms studied is available from the corresponding author upon request.

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Author affiliation:

Necmi Karagozoglu

California State University, Sacramento

Anne W. Fuller

California State University, Sacramento