The Aftermath Of Organizational Decline: A Longitudinal Study Of The Strategic And Managerial Characteristics Of Declining Firms

Abstract

This study looks at the strategic and managerial consequences of organizational decline. Comparisons were made among 49 firms filing for bankruptcy and between those firms and a matched sample of nondeclining, surviving firms for the five years prior to the bankruptcy filings. Four findings emerged: The existence of different patterns of decline was confirmed. Those patterns were related to the timing of the consequences of decline. The consequences of decline included managerial imbalances, actions concerned with efficiency, centralization effects, and strategic paralysis, all reflecting threat-rigidity responses. Finally, despite the adverse effects of organizational decline, bankruptcy may be delayed or even avoided in an environment of growing demand.