Dissertation Title:  "Examining the Scope of Multibusiness Health Care Firms: Implications for Corporate Strategy, Management Control Systems and Performance"

In the past two decades, multibusiness health care firms, also known as organized or integrated delivery systems, have grown through related horizontal and vertical expansion of business scope across the health care value chain. These firms, which provide the majority of health care services in the United States, exhibit tremendous variety in terms of their scope of business activities. Scope – defined as the breadth and type of businesses in which a firm chooses to compete – is central to a firm’s corporate strategy. Yet, empirical research on the corporate strategy of these organizations is nonexistent. This dissertation aims to contribute to the field of strategy and to the practice of management by using scope to characterize the corporate strategy of health care firms. Specifically, in three related papers, I develop a new taxonomy of corporate strategies, examine how executives create incremental economic value from owning multiple businesses and explore the role of management control systems in aligning strategy with structure. The unit of analysis, in all three papers, is the multibusiness health care firm.

In the first paper, I apply multivariate statistical cluster analysis to classify 796 firms into five mutually exclusive organizational configurations with unique scope characteristics, thus revealing a new taxonomy of corporate strategies: core service providers, mission based, contractor, health plan focus and entrepreneur. I relate these corporate strategies to financial performance and find that no single strategy leads in performance across different payer reimbursement conditions; instead, “fit” is observed where different strategies perform well under different conditions.

In the second paper, I apply structural equation modeling to develop two statistical models representing the scope of businesses in health care firms. I use the models to relate scope, corporate-level strategic decision making and financial performance. I find that organizational scope explains from 9 percent to 13 percent of the variance in financial performance. Executives strategically use scope to enhance performance by establishing consistency or “fit” among scope of businesses, extent of centralization of decision making and payment methods.

In the third paper, I use the case study method of theoretical replication to examine how two firms with different structures –centralized versus decentralized – use management control systems to implement a similar corporate strategy. I find significant differences in the areas of values, risk, reports, measures, advanced practices and use of information technology, a finding that offers theoretical and practical implications for using control systems to align corporate strategy with structure.