Recently, research on paradoxical strategies is receiving considerable attentionfrom both researchers and practitioners. The value of paradoxical strategies iscurrently considered critical in increasing firm performance and winning in thecompetitive dynamic landscape, which is characterized by uncertainty and rapidchanges in the industry and business environment (Barney and Hesterly, 2006). Suchperceived environmental characteristics require firm to apply paradoxical strategies;combining strategic flexibility and strategic consistency (Pamell, 1994).This study addresses four main questions. First, what is the effect of strategicflexibility on Erm performance. Second, what is the effect of strategic consistency onfirm performance. Third, what is the effect of combining strategic flexibility andstrategic consistency on firm performance. Fourth, what are the contingent effects ofperceived environmental uncertainty on the relationship between paradoxicalstrategies and firm performance. This study conceprualizes the application ofparadoxical strategies as a set of capabilities that enable an organization not onlyadapt to changing environmental conditions, but also to maintain current strategiesand actions for a considerable period of time.Recognizing the broad nature of strategic flexibility, it is measured in terms ofpre-emptive moves, exploitative moves, protective moves, and corrective moves.Strategic consistency is measured in terms of proactive consistency and reactiveconsistency. Perceived environment is measured in terms of munificence, dynamism,and complexity. Overall firm perfonnance is measured in terms of financialperformance and strategic performance, among others are profit, profitability, income,market share, position in the industry, and customer loyalty.A survey was conducted in the Indonesian banking industry to measure thedegree of perceived environmental uncertainty, the level of strategic flexibility andstrategic consistency, and the resulting firm performance. Questionnaires weredistributed to 131 CEOs or members of top management team of commercial banks(including sharia banks) and the 59 retumed responses were analyzed to testhypotheses.The results indicate that strategic flexibility has positive effect on bankperformance, while strategic consistency does not have positive effect on bankperformance. In terms of combining these two paradoxical strategies, the results ofthis study conhnn that the effect of strategic flexibility on bank performance dependson strategic consistency and/or perceived environment. Contrary to expectation of thisstudy, the effect of strategic consistency on bank performance insignificantly dependson perceived environment.This study makes several important contributions to growing literature onparadoxical strategies and strategic management discipline. First, this study is one oflimited researches on the effect of paradoxical strategies on firm performance. Itexamines the effect of combining paradoxical strategies on fum performance withconsidering perceived environmental uncertainty as the antecedent. Second, it alsofills in the gap in previous study on managing paradoxes in service operations settingat the corporate/strategic level. Third, this study develops a set of measures ofstrategic consistency and strategic perfomrance that captures building on priorconcepts.The fundings in this study offer inputs for the development of banking industryin Indonesia. For bank management, to sustain its growth, banks should increase its infomation technology capabilities, which are mainly supported by flexible systemsand knowledgeable people. For the banking regulator and the government agencyalike, the inputs are as follows: carry out the detailed research on the impact ofregulation and govemment policy on bank flexibility; take Bank NTT, Bank Jatim,and Bank Sumsel as samples for other regional development banks as the agile bankswith high performance; create regulation and policy to drive innovative bankingproduct development; encourage the commercial banks to undertake informationtechnology investments to boost innovative financial products and services; createspeciiic regulation about outsourcing service provider; and encourage furtherdevelopment of Internet banking services by improving system infrastructureenvironment, enabling policy and regulatory environment for this business, andbuilding up a comprehensive e-security public policy framework. |