Strategic Responses to Deregulation and Their Performance Implications in the U.S. Airline Industry

This study examines the relationships between deregulation, business strategy (low cost, differentiation, and scope), size, and firm performance in the U.S. airline industry based on archival data for the Major, National, and Large Regional air carriers in the U.S. from 1972 to 1995. Cross-sectional time series regression analysis shows that deregulation had a significant impact on the strategic choices made by airlines. Results also support a significant relationship between business strategy and firm performance. Further, the study found that firm size moderates the environment-business strategy relationship and the business strategy-firm performance relationship, thereby supporting the salience of firm size as a contingency variable in strategy studies.