Strategic Management Journal Strat. Mgmt. J., 24: 1107–1129 (2003) Published online 11 August 2003 in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/smj.343 STRATEGIC DECISION SPEED AND FIRM PERFORMANCE J. ROBERT BAUM 1 * and STEFAN WALLY 2 1 Robert H. Smith School of Business, University of Maryland, College Park, Maryland, U.S.A. 2 Argyros School of Business and Economics, Chapman University, Orange, California, U.S.A. This 4-year study examines the effect of strategic decision speed upon subsequent ﬁrm perfor- mance and identiﬁes environmental and organizational characteristics that relate to decision speed. We draw upon strategic decision-making theory and organization theory to propose that strategic decision speed mediates the relation between environmental and organizational char- acteristics and performance. Measures of business environment, organization structure, strategic decision speed, and ﬁrm performance (growth and proﬁtability) were collected from 318 CEOs from 1996 to 2000. Structural equation modeling conﬁrmed that fast strategic decision-making predicts subsequent ﬁrm growth and proﬁt and mediates the relation of dynamism, muniﬁcence, centralization, and formalization with ﬁrm performance. Copyright  2003 John Wiley & Sons, Ltd. Academic interest in the association between stra- tegic decision-making speed and ﬁrm performance emerged initially when Bourgeois and Eisenhardt (1988) identiﬁed a positive association between fast strategic decision-making and ﬁrm perfor- mance. There have been few subsequent empirical studies of strategic decision speed; however, man- agement advisors have repeatedly prescribed fast decision-making as a source of competitive advan- tage (Jones, 1993), and practitioners claim they increasingly make strategic decisions in less time (Ancona, Okhuysen, and Perlow, 2001; Kepner- Tregoe, 2001). Eisenhardt (1989) conducted an inductive study of eight high-tech ﬁrms, and she observed that the fastest strategic decision-makers had the best sales and proﬁtability. Extending this research to Key words: strategic decision-making; decision speed; performance *Correspondence to: J. Robert Baum, Smith School of Business, University of Maryland, Van Munching Hall, College Park, MD 20742-1815, U.S.A. E-mail: jrbaum@rhsmith.umd.edu 32 ﬁrms in three industries, Judge and Miller (1991) examined the association between strate- gic decision-making speed and ﬁrm performance. They found no association, except among ﬁrms in biotechnology (n = 10), a high-velocity indus- try. Thus, both Eisenhardt (1989) and Judge and Miller (1991) found that in fast-moving environ- ments ﬁrms with better performance made faster strategic decisions. In contrast, Forbes (2001) stud- ied decision speed in 83 young Internet companies and found no effect upon ﬁrm performance. Our purpose is (1) to clarify the relationship between strategic decision speed and ﬁrm per- formance and (2) to better understand the forces that impact strategic decision speed. To guide our understanding of these factors, we draw upon strategic decision process theory’s proposition that decision-makers’ cognitions are motivated and constrained by their business environment, orga- nization structures, and resources, as well as their personal experiences and perceptions. In an earlier study, Wally and Baum (1994) explored personal, organizational, and industry causes of decision Copyright  2003 John Wiley & Sons, Ltd. Received 19 February 2002 Final revision received 29 March 2003