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Firm Turnarounds: an Integrative Two‐Stage Model

Author

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  • Kamala Arogyaswamy
  • Vincent L. Barker
  • Masoud Yasai‐Ardekani

Abstract

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.

Suggested Citation

  • Kamala Arogyaswamy & Vincent L. Barker & Masoud Yasai‐Ardekani, 1995. "Firm Turnarounds: an Integrative Two‐Stage Model," Journal of Management Studies, Wiley Blackwell, vol. 32(4), pages 493-525, July.
    • Handle: RePEc:bla:jomstd:v:32:y:1995:i:4:p:493-525
    DOI: 10.1111/j.1467-6486.1995.tb00786.x
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    Cited by:

    1. Laffranchini, Giacomo & Hadjimarcou, John & Kim, Si Hyun, 2022. "The first turnaround response of family firms in a crisis situation," Journal of Family Business Strategy, Elsevier, vol. 13(1).
    2. S. Jeyavelu, 2009. "Organisational Identity Dissonance in Organisational Decline and Turnaround," Vision, , vol. 13(2), pages 33-45, April.
    3. Andrew Chan & Francis Cheng & Shuk-Ling Cheng, 2023. "Post-Crisis Sustainable Performance of Manufacturing SMEs: The Roles of Positive Orientation, Financial Slack, and External Networks," Sustainability, MDPI, vol. 15(17), pages 1-18, August.
    4. Manuel Rico & Naresh R. Pandit & Francisco Puig, 2021. "SME insolvency, bankruptcy, and survival: an examination of retrenchment strategies," Small Business Economics, Springer, vol. 57(1), pages 111-126, June.

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