To test our theory of strategic coherence, we take a two-step approach. To isolate the most relevant ‘observed variables’ from the roughly 500 data points, we firstly run a principal component factor analysis. The resulting factor scores are then used in the SEM. The SEM, therefore, consists of a measurement model constructed by observed variables that delineate the exogenous and endogenous variables: dispersed functionality; international manage- ment capability; and strategic coherence (resulting from the factor scores), and a structural model constructed with the relationships between the exogenous and endogenous variables. Our hypothesized model should explain expected (or unexpected) relations in the data, and determine whether the proposed model fits the data.