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Firm Turnarounds: an Integrative Two‐Stage Model *
Author(s) -
Arogyaswamy Kamala,
Barker Vincent L.,
YasaiArdekani Masoud
Publication year - 1995
Publication title -
journal of management studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.398
H-Index - 184
eISSN - 1467-6486
pISSN - 0022-2380
DOI - 10.1111/j.1467-6486.1995.tb00786.x
Subject(s) - retrenchment , process (computing) , dysfunctional family , position (finance) , business , process management , key (lock) , economics , industrial organization , operations management , computer science , psychology , political science , finance , public administration , psychotherapist , operating system , computer security
This paper 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.