Strategic leaders or strategic groups: A longitudinal Data Envelopment Analysis of the US brewing industry

This paper builds on strategic group theory which was originally introduced to help explain the observed variation in firm profitability across an industry. This paper applies Data Envelopment Analysis (DEA) to identify both strategic leaders, the ‘best practice’ players in the industry, and strategic groups to examine which are the source of the most sustained heterogeneity in the performance of US brewers. Contrary to the prevalent research approach in Strategy and Organization research which places a premium on empirical analyses that maximize explanation of average behavior, this paper examines extremal observations as a means of studying or inducing theories about best practice, such as best strategies or most effective organization design. The paper argues that significant insights, new knowledge, and unexpected theories can arise from studying the best or worst of a population. The paper applies DEA to a longitudinal reanalysis of US brewing data to demonstrate its usefulness for obtaining new insights from identifying and studying industry outliers. The paper raises important questions about the construct of strategic groups and illustrates how competing theories can be deduced and analyzed for explaining performance heterogeneity in the US brewing industry.