Does the Left Follow the Right Going Downhill? An Extension of Strategy and Structural Dynamics

The dynamics of strategy and structure remain a central element in the strategic management literature. This study examined the interplay that exists between strategy and structure as firms change one or the other. However, unlike prior research examining this for firms expanding diversification or increasing structural differentiation, this study focused on firms decreasing diversification and decreasing structural differentiation. This focus has yet to be examined in the literature. The results from the study suggest that decreases in diversification do not significantly increase the likelihood of decreases in decentralization unless the diversification decreases are of greater magnitude. This finding departs from prior literature, which consistently found that structure follows strategy independent of magnitude. On the other hand, the results suggest decreases in structural differentiation do impact future decreases in diversification. This finding partially supports prior studies examining this relationship for firms increasing structural differentiation. Combined, these findings suggest that, unlike walking uphill, when walking downhill, the left foot does not necessarily follow the right.