Firm turnarounds: an integrative two-stage model

Article Abstract:

This papers presents a model proposing that turnaround firms exhibit two classes of response to decline: (a) decline-stemming strategies that reverse the dysfunctional consequences of decline, and (b) recovery strategies that position the firm to better compete in its industry. We further propose that effective top management actions supporting both of these strategies are vital to recovering from decline. Our model of the turnaround process questions some existing assumptions about turnarounds and extends theory in several key areas. First, we argue that success in initially stemming decline requires managers to go beyond retrenchment or focusing on financial issues to include effective management of a firm's external stakeholders and internal climate and decision processes. Second, we outline important contingencies impacting each class or stage of response to decline and discuss the interaction between stages. Finally, we demonstrate how our model provides explanations for several unresolved issues regarding turnarounds and has implications for management practice. (Reprinted by permission of the publisher.)

Models

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Contextual determinants of strategic planning processes

Article Abstract:

This paper extends the study of contextual determinants of planning processes in three important directions. First, we present a comprehensive conceptualization of planning processes along six design dimensions. Second, in addition to examining the effects of environments, technology, and organizational complexity, we assess the effects of the organization's strategic orientation on the design of planning processes. Third, we move towards a configurational approach and explore the effects of concurrent presence of multiple contingencies. The study uses data from a large sample of North American corporations. The results suggest that the forces of context govern the design of planning processes. Furthermore, exploration of the effects of concurrent presence of multiple contingencies provides interesting illustrations of situations where the forces of context are aligned in the same direction as well as situations where the forces pull in opposite directions. (Reprinted by permission of the publisher.)

Analysis, Context effects (Psychology)

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An investigation of industry and firm structural characteristics in corporate turnarounds

Article Abstract:

This article uses the structure/conduct/performance framework as an underpinning to investigate the attributes of turnaround firms. Turnaround is defined as a substantial improvement of the firm's return on assets relative to the average return of its industry. Industry and firm structural characteristics including concentration, industry growth, R&D, advertising, market share, size, diversification, capital intensity and margins are identified. The results of a series of univariate and multivariate tests run on a sample of turnaround and non-turnaround firms indicate that size, R&D, and an interaction between operating margin and advertising can be helpful in explaining some turnaround situations. (Reprinted by permission of the publisher.)

Research, Economic aspects, Organizational research

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