Work

The Effects of Cost and Asset Retrenchment on Firm Performance: The Overlooked Role of a Firm’s Competitive Environment

Year: 2003

Type: article

Abstract: When firms face declining financial performance, research suggests that cost and asset retrenchment can lead to improved performance among poorly performing firms. However, previous studies have largely focused on firms operating in mature industries. This research develops and tests arguments that cost and/or asset retrenchment strategies will have different effects on firm performance in competitive environments characterized as growing and declining. In growth industries, asset retrenchment was positively related to performance improvement while cost retrenchment was unrelated. In declining industries, cost retrenchment was positively related to improved performance while asset retrenchment had a negative effect on firm performance. Implications of these findings for turnaround strategies are discussed.

Source: Journal of Management

DOI: 10.1016/j.jm.2003.01.002

Authors: J. L. Morrow, Richard A. Johnson, Lowell W. Busenitz

Institutions: Birmingham–Southern College, University of Oklahoma

Language: English

Topic: Organizational Downsizing and Restructuring

Subfield: Organizational Behavior and Human Resource Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

OpenAlex ID: W1995491558

FWCI: 2.861

Cites: 76

Cited by: 159

Related to: 10