STRATEGIC CHANGE IN THE TURNAROUND PROCESS - THEORY AND EMPIRICAL-EVIDENCE

Early corporate turnaround theorists argued that strategic reorientati ons are central to the recovery process at many declining firms. Howev er, subsequent large-sample empirical studies have reported that perfo rmance turnarounds for declining firms are primarily associated with c utback actions that increase efficiency, thus creating a gap between t heory and empirical findings. We close this gap by presenting and empi rically supporting a model proposing that the extent of strategic chan ge initiated in a successful turnaround varies systematically with a d eclining firm's need and capacity to reorient its strategy. Based on o ur model, we offer explanations for why past large-sample researchers were not able to verify the role of strategic change in the turnaround process and we reassert the adaptive role that strategic reorientatio ns have in the turnaround attempts of declining firms with weak strate gic positions.