Stakeholder Conflict in Organizational Decline and Turnaround

Most organizations will suffer from decline at some point. A significant amount of research has investigated the actions firms suffering from decline can initiate to turnaround their performance, but scant research has examined how the interaction between relevant stakeholders drive these actions. During times of decline, firms have dwindling resources and stakeholders are sensitized to protect their interests, which are not necessarily consonant with each other. The resultant actions that firms take are as much a reflection of the interests of stakeholders as it is a reflection of the strategic leadership or cognitive biases of the top management team. In this study we examine how transient and institutional investors affect the level of competitive activity and the turnover of internal stakeholders (CEO and TMT) during organizational decline and how these actions and turnover affect the probability of turning around the firm’s performance.