Environmental Uncertainty as a Contingent Factor of Business Strategy Choice Decision: Introducing an Alternative Measurement of Uncertainty

Abstract

This study aims to examine the contingent factor of a business strategy choice decision, that is, environmental uncertainty. This study uses secondary data as an alternative method to analyze the technology uncertainty, one of environmental uncertainty components. To examine environmental uncertainty, this study develops an environmental uncertainty index (EUI). Using samples of manufacturing companies listed on Indonesia Stock Exchange (IDX) for period 2009 to 2012, and multinomial logistic regression, this study finds that probability companies to choose prospector is greater than that of the analyzer; however, it fails to prove that probability companies choosing defender are greater than that of an analyzer. The findings suggest that the new technology uncertainty measure is more applicable and better than other measures, moreover EUI measures the environmental uncertainty objectively, this new measures can be applied for future research. This study increases the understanding of the relation between business strategy and its contingent factor, i.e. environmental uncertainty.

Keywords

• Business strategy
• contingent factor
• environmental uncertainty
• Indonesia