Public Performance & Management Review, Vol. 36, No. 4, June 2013, pp. 585–615. © 2013 M.E. Sharpe, Inc. All rights reserved. Permissions: www.copyright.com ISSN 1530–9576 (print), ISSN 1557–9271 (online) DOI: 10.2753/PMR1530-9576360405 585 STRATEGY FORMULATION AND PERFORMANCE Evidence from Local Public Transit Agencies THEODORE H. POISTER Georgia State University LAUREN HAMILTON EDWARDS Sam Houston State University OBED Q. PASHA Georgia State University JASON EDWARDS Georgia State University ABSTRACT: Building on an initial stream of research on the relationship between strategy process and performance, this article analyzes the effect of strategic planning and logical incrementalism on the performance of 104 small and medium-size urban transit agencies in the United States. Data on strategy development were obtained through an online survey of agency managers, while objective performance data were drawn from the National Transit Database. Ordinary least squares regression models were used to test the effects of the two planning approaches and of the interaction between them in 2008, controlling for contextual and operational variables as well as performance in 2004. The results suggest that strategic planning exerts a positive influence on effectiveness and system productivity measures, but does not influence efficiency or cost-effectiveness measures. Logical incrementalism by itself appears to have a negative effect on the number of passenger trips per capita and transit system productivity measures. However, conducting strategic planning efforts within a larger framework of logical incremental decision-making, as represented by the interaction term, positively affects both the effectiveness and the system productivity measures. Taken together, these results suggest that strategic planning, whether on its own or combined with logical incrementalism, has a positive effect on some dimensions of performance, at least within the context of the public transit service industry. KEYWORDS: logical incrementalism, performance, strategic planning, transit agencies The emphasis on performance in government has risen meteorically over the past few decades in response to the convergence of two sustained trends: increased