Examining the interrelationships among perceived environmental change, strategic response, managerial characteristics, and organizational performance $ Karen Strandholm a, * , Kamalesh Kumar a,1 , Ram Subramanian b,2 a School of Management, The University of Michigan-Dearborn, 4901 Evergreen Road, Dearborn, MI 48128, USA b Seidman School of Business, Grand Valley State University, Grand Rapids, MI 49504, USA Received 27 March 2001; accepted 8 January 2002 Abstract This study attempts to integrate compatible, yet fragmented research streams, related to the association among environmental change, managerial characteristics, strategic orientation, and organizational performance. By combining a variety of theoretical perspectives, an integrated framework is developed that examines these interrelationships. The results show that managerial perception of environmental change influences the strategic adaptive response of the organization and the selection of top managers. Further, it was found that organizations that are able to achieve the alignment among perceived environmental change – strategic adaptive response – managerial characteristics exhibit superior performance in terms of a variety of performance outcomes as compared to organizations where such alignment is lacking. D 2002 Elsevier Science Inc. All rights reserved. Keywords: Managerial characteristics; Strategic adaptation 1. Introduction The ability of an organization to adapt to changing environmental circumstances is the key to organizational survival (Lawrence, 1981; Yasai-Ardekani and Nystrom, 1996) and the effectiveness of the adaptive response is dependent on aligning the response to the environmental circumstances faced by the organization (Hambrick, 1983; Lee and Miller, 1986; Miles and Snow, 1978). If adapting to changing environmental circumstances is critical to organ- izational survival then so is the selection of the individuals most responsible for making the decisions that direct the strategic adaptive response (Wiersema and Bantel, 1992). In fact, there seems to be significant agreement that successful strategy implementation requires matching managerial char- acteristics with strategy (e.g., Beal and Yasai-Ardekani, 2000; Govindarajan, 1989; Miles and Snow, 1978; Thomas et al., 1991). As important as it seems to match strategies and mana- gerial characteristics, few studies (Guthrie et al., 1991; Subramanian and Sanchez, 1998; Thomas and Ramaswamy, 1993) have addressed the selection of managers in the context of adapting to changing environmental circumstan- ces. Although studies that have specifically addressed this issue do provide a good start to understanding that different strategic adaptive responses require different types of man- agers to implement the response, a close examination of these studies reveals some serious limitations. First, researchers in each of these studies have assumed that all organizations within the same industry are operating in the same environment, failing to consider that managers in different organizations within the same industry develop different interpretations or perceptions about the envir- onment and how it impacts them (Aldrich and Pfeffer, 1976; Daft and Weick, 1984; Dutton and Jackson, 1987) and that they have some latitude to enact their own envir- 0148-2963/$ – see front matter D 2002 Elsevier Science Inc. All rights reserved. doi:10.1016/S0148-2963(02)00285-0 $ This study was funded by a research grant received from the Office of Organized Research, The University of Michigan-Dearborn. Each author has made equal contribution to this study. * Corresponding author. Tel.: +1-313-593-1268; fax: +1-313-593- 5636. E-mail addresses: Kstrandh@umd.umich.edu (K. Strandholm), kamalesh@umd.umich.edu (K. Kumar), Subramar@gvsu.edu (R. Subramanian). 1 Tel.: + 1-313-593-5214; fax: + 1-313-593-5636. 2 Tel.: + 1-616-336-7442; fax: + 1-616-336-7445. Journal of Business Research 57 (2004) 58 – 68