Aligning market and nonmarket strategy to enhance performance

Purpose This paper aims to deepen our comprehension of how firm size, market strategies and nonmarket strategies influence organizational performance. It assesses the validity of two market–nonmarket strategy configurations: (1) cost leadership with political nonmarket strategies (NMS) and (2) differentiation with social NMS. Design/methodology/approach It surveyed 878 U.S. firms to examine the effects of firm size, market strategies (e.g. cost leadership and differentiation) and political and social nonmarket strategies (NMS) on firm performance. It employed partial least squares structural equation modeling to test the hypotheses and importance-performance map analysis (IPMA) for greater insight. Findings Differentiation and social NMS – individually or together – enhanced firm performance, whereas cost leadership and political NMS had either no effect or a negative impact on performance, regardless of firm size. Social NMS partially mediated the differentiation-performance nexus for all firms across multiple size categories. IPMA results highlight the value of social – but not necessarily political – NMS, particularly in conjunction with a market strategy based on unique product or service offerings. Research limitations/implications The findings support the notion of market–nonmarket strategy configurations linked to firm size and performance. Future research should examine how firms in other nations employ market and nonmarket strategies by exploring the tradeoffs and complementarities of political and social NMS. Originality/value This work makes two primary contributions to current research on MS and NMS. First, it builds upon recent research regarding NMS as a mediator in the relationship between firm strategy and performance. Second, it adopts a more granular perspective by examining the connections among MS, NMS and firm performance, categorizing firms by size.