Linking top manager attributions to strategic reorientation in declining firms attempting turnarounds

For decades, researchers have been reporting case studies or theoretic models suggesting that top management's interpretations of the sources of performance problems shape their firm's response to declining performance. Yet, no systematic studies of declining firms have examined this argument. Using field and archival data from a sample of declining firms, this study examines the influence that causal attributions for the sources of declining performance have on the level of strategic change implemented during turnaround attempts. Consistent with attribution theory and past case study research on turnaround attempts, we find that firms whose top managers attribute decline to internal sources as opposed to external sources are more likely to show greater levels of strategic reorientation in response to declining performance. We further find that causal attributions are influenced by factors surrounding the turnaround attempt, such as top management changes and firm size, and that other firm factors, such as director turnover and financial slack, can directly spur strategic reorientation. Finally, we forward implications for understanding firm responses to decline. (C) 2002 Elsevier Science Inc. All rights reserved.