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OrganizationScience
Vol. 21, No. 2, March–April 2010, pp. 540–553
issn
1047-7039
eissn
1526-5455
10
2102
0540
informs
 ® 
doi
10.1287/orsc.1090.0464©2010 INFORMS
A General Framework for EstimatingMultidimensional Contingency Fit
Simon C. Parker
Richard Ivey School of Business, University of Western Ontario, London, Ontario N6A 3K7, Canada,sparker@ivey.uwo.ca
Arjen van Witteloostuijn
Department of Management, University of Antwerpen, Prinsstraat 13, 2000 Antwerpen, Belgium,arjen.vanwitteloostuijn@ua.ac.be
T
his paper develops a framework for estimating multidimensional fit. In the context of contingency thinking and theresource-based view of the firm, there is a clear need for quantitative approaches that integrate fit-as-deviation, fit-as-moderation, and fit-as-system perspectives, implying that the impact on organizational performance of series of bivariate(mis)fits and bundles of multiple (mis)fits are estimated in an integrated fashion. Our approach offers opportunities todo precisely this. Moreover, we suggest summary statistics that can be applied to test for the (non)significance of fitlinkages at both the disaggregated level of individual bivariate interactions, as well as the aggregated level of groups of multivariate interactions. We systematically compare our approach with extant alternatives using simulations, includingthe fit-as-mediation alternative. We find that our approach outperforms these established alternatives by including fit-as-moderation and fit-as-deviation as special cases, by being better able to capture the nature of the underlying fit structure inthe data and by being relatively robust to mismeasurements, small sample sizes, and collinearity. We conclude by discussingour method’s advantages and disadvantages.
Key words
: contingency theory; multidimensional fit; organizational performance
 History
: Published online in
Articles in Advance
July 28, 2009.
Introduction
The notion of alignment, congruence, fit, or match (fit,for short) has been very popular in management stud-ies ever since the classic contingency-type studies of the1960s. In the early contributions, the key logic was thatparticular internal features of an organization, such as itsprocesses, structures, or technologies, are best suited toparticular types of environment or contingencies such ascomplexity, dynamism, and uncertainty. The underlyingidea was that if the organization could indeed benefitfrom such a “fit,above-normal or superior organiza-tional performance would be within reach. This argu-ment has been extended in different directions in thepast three decades. For example, with the emergenceof the strategic choice perspective (Child 1972), char-acteristics of strategies and strategy-makers were intro-duced. Related to this, ideal “configurational” types weredeveloped, prominent examples being those of Miles andSnow (1978) and Porter (1980). Additionally, this con-tingency or fit logic has been applied to a wide arrayof functional domains, varying from top managementteam studies (Boone et al. 2004) to international business(Luo and Park 2001). Contingency logic has penetratedinto other subdisciplines of management as well, such asaccounting (e.g., Hyatt and Prawitt 2001) and marketing(e.g., Vorhies and Morgan 2003).The underlying theoretical rationale is appealing(Donaldson 2001). In their theoretical essay, Milgromand Roberts (1995) argue that complementarities acrossorganizational features are associated with above-normalperformance; they apply ideas from the economic theo-ries of complementarity and supermodularity (for empir-ical work in this tradition, see Athey and Stern 1998,Mohnen and Röller 2005). In a similar vein, Rivkin(2000) develops a model of complexity that revealshow the number of organizational elements and theirinteractions are positively linked to the emergence andsustainability of competitive advantages. Additionally,he analyzes the downside of fit: organizational inertia(see Wright and Snell 1998). In a way, this impliesthe argument that a static fit may turn into a dynamicmisfit if the environment changes such that organi-zational adaptation—and hence flexibility—is required(see Zajac et al. 2000). This type of theoretical work isclosely aligned with the resource-based view of the firmbecause the complex and subtle interaction among setsof organizational resources (Dierickx and Cool 1989,and Donaldson 2000) is likely to produce a competi-tive advantage—and hence above-normal performance—that is difficult to imitate or compete away (Barney1991). Thus, modern organization theories confirm theearly contingency logic that multivariate configurationalapproaches are needed to explain performance differ-ences, in and over time.The current paper adds to the large contingency-type of literature by proposing an econometric approach
540
 
Parker and van Witteloostuijn:
General Framework for Estimating Multidimensional Contingency Fit 
Organization Science 21(2), pp. 540–553, ©2010 INFORMS
541
for estimating a comprehensive, flexible, robust, andmultidimensional notion of fit. Although hundreds of empirical studies have been carried out in the fit-relatedtradition, the multidimensional conception of fit is socomplex that empirical estimation is still anything buteasy, a situation that leads Burton et al. (2002, p. 1480)to the conclusion that “[The concept of fit] is less well-developed in terms of operational statements and empir-ical tests.” Our paper’s contribution is threefold. First,we develop a general and flexible multivariate contin-gency model of organizational performance that includesdifferent conceptions of fit as special cases. In doingso, we integrate fit-as-deviation, fit-as-moderation, andfit-as-system perspectives in a quantitative framework,including interaction (explicitly) and distance (implic-itly) measures of fit in a general model specification,both individually and as bundles.Second, we suggest summary statistics derived fromthe model that retain in their construction informa-tion about the sources of fit and that can distinguish“genuine” fit from random noise. Our approach can beapplied to test for the (non)significance of fit linkagesat both the disaggregated level of individual bivariateinteractions as well as the aggregated level of groups of multivariate interactions. In this way, the impact on orga-nizational performance of series of bivariate (mis)fits
and 
bundles of multiple (mis)fits are estimated in anintegrated fashion.Third, we systematically compare our method withextant alternatives using Monte Carlo simulations. Webelieve a comparative approach is especially valuablegiven the plethora of different fit methods now available.As part of this approach, we also test the fit-as-mediationalternative. We find that our method outperforms theseestablished alternatives by including fit-as-moderationand fit-as-deviation as special cases; by being better ableto capture the nature of the underlying fit structure in thedata; and by being relatively robust to mismeasurements,small sample sizes, and multicollinearity. Of course, thisdoes not imply that our approach is always superioror that our method does not come at any cost. Partic-ularly, the number of covariates increases rapidly if thenumber of contingencies is expanded. Then, theory iscritical for the selection of a workable number of con-tingencies. The key is, we believe, a finding from oursimulation exercise, which shows that our approach isthe only one able to identify the underlying nature of fit. More broadly, we will reflect on the advantages anddisadvantages of our method in the appraisal.The structure of the paper is as follows. The next sec-tion briefly reviews fit studies in order to position ourcontribution in the context of the extant literature. Theone after develops our general model of organizationalperformance, followed by the introduction of our mea-sure of fit. The penultimate section presents the resultsof comparative Monte Carlo simulations. In the finalsection, we offer an appraisal and conclusion, brieflyreflecting upon how our general framework for measur-ing fit relates to the broader literature, including alter-native approaches and the different traditions, and theimplications for organizational scientists.
Background Literature
A classic conceptual contribution to the empirical fitliterature is Venkatraman (1989). He discusses threecriterion-specific perspectives of fit: fit as moderation,fit as mediation, and fit as profile deviation. The medi-ation fit approach differs from the moderation one inthat the former, contrary to the latter, is based upon asystem of (generally two) equations. For example, themediation approach first models strategy as a function of structure and, subsequently, performance as a functionof strategy (see, e.g., Boone et al. 1996). In the mod-eration approach, using the same example, performanceis modeled as a function of strategy and structure in asingle equation. The moderation fit concept relates tointeraction effects. The argument is that if variables
x
and
y
jointly produce a positive fit, their product term
xy
will affect performance positively (and vice versa,in the case of a misfit). Strictly speaking, there can beany number of variables in the interaction term; but inpractice, by far the majority of fit studies are limited tobivariate interactions, with an occasional exception of alimited number of three-way interactions (see, e.g., Garget al. 2003). The profile deviation fit notion relates tobundles of multiple variables. Here, the logic is that fora configuration of variables
x
1
x
n
y
1
y
n
a setof their levels is linked to organizational performance(or any other criterion variable, for that matter) as a
set 
rather than as a series of separate bivariate relationships.In this tradition, a popular method is to calculate devia-tion measures that capture the distance of a firm from anideal-type configuration, the hypothesis being that thisdistance is negatively associated with organizational per-formance (see, e.g., Vorhies and Morgan 2003).From this brief overview, we conclude that twoaspects are key to distinguishing one criterion-specificfit approach from another. The first one contrasts fit asmoderation with fit as deviation (see Donaldson 2001).Fit as moderation captures (mis)fit in the form of prod-uct terms of the contingency variables—say,
xy
; fit asdeviation measures misfit by calculating the distance of the actual value of a contingency variable from its idealtype—say,
x
x
2
, where
x
is the ideal type’s valueof 
x
(e.g., the value of 
x
that is associated with maxi-mum performance). Second, fit approaches may focus onthe individual contribution to performance of each andevery contingency variable, or on the joint contributionof a bundle of contingency variables. In the terminol-ogy of Drazin and Van de Ven (1985), the latter may bereferred to as the fit-as-system approach. In the current
 
Parker and van Witteloostuijn:
General Framework for Estimating Multidimensional Contingency Fit 
542
Organization Science 21(2), pp. 540–553, ©2010 INFORMS
paper, we develop the so-called general interaction (GI)approach that integrates all three conceptions of fit—i.e.,fit as moderation, fit as deviation, and fit as system.To explore this, we compare the GI approach to fourtypical examples from the literature, each representinga relatively “pure” example of an empirical approachto measure fit as moderation, deviation, mediation, andsystem. First, many fit-as-moderation studies introducea series of (generally bivariate) interaction terms. Ourtypical example is Skaggs and Ross Huffman (2003).Second, deviation fit studies tend to calculate the dis-tance of a focal firm vis-vis an ideal-type config-uration by computing multivariate (squared) Euclidiandistances measures. We take Vorhies and Morgan (2003)as a typical example. Third, in the advanced fit-as-mediation tradition, (standardized) residuals from afirst-step regression are entered into a second-stageperformance equation. We focus on Zajac et al. (2000)as a sophisticated case in point. Fourth, system fit studiesoften introduce individual and sum dummy measures of (mis)fit. Our benchmark is Burton et al. (2002, 2003).
1
A Model of Organizational Performance
Let
,
E
, and
S
denote three sets of variables, namelyinternal (organizational), external (environmental), andstrategy variables, respectively.
2
Each set contains at leastone variable. There are
n
variables in
, where each vari-able in
is denoted by
x
i
; i.e.,
=
x
1
x
2
x
n
x
i
n
1
. Each variable in
E
is denoted by
y
, and eachin
S
by
z
k
, with
E
=
y
n
E
1
and
S
=
z
k
n
S
1
. Withoutlosing generality, all variables are measured in natu-ral logarithms: This makes the scale of measurement of the performance and explanatory variables irrelevant andenables the use of the general translog function definedbelow. It is also assumed that the researcher has alreadychosen these variables for their potential usefulness forexplaining variations in a given measure of firm perfor-mance,
p
(also measured in logs). Hereafter we refer toall variables apart from
p
as “explanatory variables.At the outset, we define “fit” in terms of the extentto which the explanatory variables as pairs or as bun-dles affect
p
. A fit may be either beneficial or harmfulfor firms. For example, phrased in the fit-as-interactiontradition, a positive fit between two variables involvesthem interacting in a way that enhances performance,whereas a negative fit has the opposite impact. In theliterature, negative fit is often referred to as “misfit.An absence of fit is also possible, arising (in a heuristicsense) if there is zero covariance between performanceand a given pair or bundle of explanatory variables. Afterdescribing our model of performance, we will define fitmore precisely, also showing how distance-based mea-sures of fit are nested in our approach.Below we use an extension of the general translog(TL) function to propose a GI model of (log) firmperformance,
p
. The TL function is well known for itsgenerality and flexibility. It approximates
any
functionalrelationship between firm performance on the one handand a given set of explanatory variables on the other.Formally, it provides a second-order Taylor approxi-mation to any functional relationship, which means itapproximates
any
performance equation as a series of terms involving increasing powers of the variables, upto the second order.
3
The practical importance of thispoint is that any measure of fit will only be appropriateif it is based on a suitable underlying model. Becausethe researcher rarely if ever knows the true relationshipbetween performance and its determinants, it is thereforedesirable to utilize a specification that is general enoughto encompass (at least to a second-order approximation)
any
that may exist. This flexibility is a key advantageof the GI approach. Hence our use of the TL function.Moreover, as we will show below, the TL specificationoffers a way to integrate the fit as moderation (FAM)and the common symmetric approaches to fit as devia-tion (FAD) into a single to-be-estimated equation.The GI model can be written as
p
=
+
n
i
=
1

iI 
x
i
+
iI 
x
2
i
+
n
E
=
1

jE
y
+
jE
y
2
+
n
S
k
=
1

kS
z
k
+
kS
z
2
k
+
i
=
i
ii
x
i
x
i
+
=
jj 
E
y
y
+
k
=
k
kk
S
z
k
z
k
+
n
i
=
1
n
E
=
1
 
ijIE
x
i
y
+
n
i
=
1
n
S
k
=
1
 
ikIS
x
i
z
k
+
n
E
=
1
n
S
k
=
1
 
jkES
y
z
k
+
n
i
=
1
n
E
=
1
n
S
k
=
1
ijk
x
i
y
z
k
(1)where the
s,
s,
 
s, and
s are coefficients that willbe interpreted in the remainder of this section. This willinclude an explanation of how (1) is an extension of theconventional TL function.
4
Apart from an intercept
—which takes care of scal-ing issues—performance may be affected by threebroad categories of factors. One category comprisesthe first three sums of (1). We will call the compo-nents of these sums
individual
determinants of perfor-mance. Note that these terms also happen to capture thecommonly applied symmetric FAD specification of fitbecause the FAD specification
p
=
0
+
1
x
x
2
+
2
y
y
2
+
3
z
z
2
can be rewritten as
5
p
=
+
x
+
x
2
+
E
y
+
E
y
2
+
S
z
+
S
z
2
(2)which is evidently a special case of (1). Viewed this way,the GI model implies an integrated method for estimat-ing both FAD and FAM types of fit. Below, the focus of 

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