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| Author: | Wiseman, R. M. Bromiley, P. |
| Title: | Toward a model of risk in declining organizations: An empirical examination of risk, performance and decline |
| Journal: | Organization Science
1996 : SEP/OCT, VOL. 7:5, p. 524-543 |
| Index terms: | ORGANIZATIONAL DECLINE ORGANIZATIONS RISK EXPECTATIONS |
| Language: | eng |
| Abstract: | This article examines the risk of firms in decline by using a model based on Cyrt and March's (1963) behavioral theory of the firm. The basic variables are performance, slack, aspirations, expectations, risk (income stream uncertainty) and organization size as a measure of decline. The results suggest organizational decline and potential slack positively influence risk whereas recoverable slack, and difference between performance aspirations and expectations negatively influence risk; and recoverable slack and risk negatively influenced performance. The results suggest a cyclical process with positive feedback in which decline and the loss of certain slack resources increase risk which in turn reduces performance and results in further organizational shrinkage. Firms facing decline may take risks that exacerbates the decline. |
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