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Organizational adaptation in an economic shock: The role of growth reconfiguration
Author(s) -
Chakrabarti Abhirup
Publication year - 2015
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.2309
Subject(s) - diversification (marketing strategy) , shock (circulatory) , control reconfiguration , adaptation (eye) , business , economics , industrial organization , economic system , marketing , engineering , medicine , embedded system , physics , optics
Studies suggest that firms navigating an economic shock can adapt and improve performance by targeting perceived growth opportunities. A puzzle, however, is that an economic shock increases environmental uncertainty and therefore the risk associated with growth reconfiguration. This study finds that growth reduced performance and increased the risk of firm failure during the Asian economic shock of 1997. Growing firms differed in the extent to which they were able to mitigate the constraints imposed by the shock. However, the presence of developed external institutions played a more systematic role in their adaptation than did organizational resources represented by financial slack or product diversification. The deliberate attempt to reconfigure augmented the adverse effect of the economic shock on firm performance and survival . Copyright © 2014 John Wiley & Sons, Ltd.