Creating Value in the Face of Declining Performance: Firm Strategies and Organizational Recovery

Strategic Management Journal, Vol. 28, No. 3, pp. 271-283, 2007

13 Pages Posted: 19 Dec 2008

See all articles by J.L. Morrow

J.L. Morrow

Birmingham-Southern College

David G. Sirmon

Texas A&M University

Michael A. Hitt

Texas A&M University - Department of Management; Texas Christian University

Tim R. Holcomb

Miami University - Farmer School of Business

Date Written: December 17, 2008

Abstract

Firms that have failed to meet the performance expectations of investors must seek new ways of creating value or face the loss of financial support. Using resource-based arguments, we find that valuable and difficult-to-imitate strategies that recombine the firm's existing stock of resources to create new products, processes, or technologies have a positive effect on organizational recovery as measured by investors' expectations. Similarly, acquiring new resources through mergers or acquisitions also has positive effects on investors' expectations. In contrast, valuable and difficult-to-imitate strategies that provide the firm with access to new resources through alliances or joint ventures, do not affect investors' expectations of performance. We also find that taking actions that are not valuable and difficult-to-imitate either have no effect on performance or may lead to further performance declines. Lastly, our results show that valuable and difficult-to-imitate strategic actions that use existing resources in new ways contribute the most to organizational recovery.

Keywords: Value creation, resource-based view, growth strategies, investor expectations, organizational recovery

Suggested Citation

Morrow, J.L. and Sirmon, David G. and Hitt, Michael A. and Holcomb, Tim R., Creating Value in the Face of Declining Performance: Firm Strategies and Organizational Recovery (December 17, 2008). Strategic Management Journal, Vol. 28, No. 3, pp. 271-283, 2007, Available at SSRN: https://ssrn.com/abstract=1317475

J.L. Morrow

Birmingham-Southern College

900 Arkadelphia Road
Birmingham, AL 35254
United States

David G. Sirmon

Texas A&M University ( email )

430 Wehner
College Station, TX 77843-4218
United States

Michael A. Hitt

Texas A&M University - Department of Management ( email )

430 Wehner
College Station, TX 77843-4218
United States
979-458-3393 (Phone)

Texas Christian University ( email )

Fort Worth, TX 76129
United States

Tim R. Holcomb (Contact Author)

Miami University - Farmer School of Business ( email )

Oxford, OH 45056
United States

HOME PAGE: http://fsb.miamioh.edu/

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