Hostname: page-component-586b7cd67f-vdxz6 Total loading time: 0 Render date: 2024-11-22T13:13:03.709Z Has data issue: false hasContentIssue false
  • English
  • Français

Environmental Jolts, Clocks, and Strategic Change in the U.S. Airline Industry: The Effects of Deregulation and the 9/11/2001 Terrorist Attacks

Published online by Cambridge University Press:  20 January 2017

Irene Goll  and
Abdul A. Rasheed
Irene Goll
Affiliation:
University of Scranton
Abdul A. Rasheed
Affiliation:
University of Texas at Arlington
Get access Rights & Permissions [Opens in a new window]

Abstract

This study examines the effects of two major environmental jolts, the Airline Deregulation Act of 1978 and the 9/11/2001 terrorist attacks, on strategic change and performance in the U.S. air carrier industry. The sample includes the Major U.S. air carriers during two periods of time: deregulation (1974-1986) and 9/11/2001 (1997-2008). Data were collected from archival sources and analyzed using cross-sectional time series regressions with fixed effects. The results show that following both environmental jolts, the initial response of the airlines was emphasis on cost control. However, over the long run, there was a deceleration of the emphasis on cost control. Further, following deregulation, the long run response involved the acceleration of differentiation change. We also found a significant relationship between strategic change and firm performance. The results contribute towards a reconciliation of the conflicting predictions of the repetitive momentum hypothesis and the deceleration hypothesis.

Keywords

environmentstrategic changeairline industry
Type
Research Article
Information
Business and Politics , Volume 13 , Issue 4 , December 2011 , pp. 1 - 35
Copyright
Copyright © V.K. Aggarwal 2011 and published under exclusive license to Cambridge University Press 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Amburgey, Terry L., Kelly, Dawn, Barnett, and William P. 1993. “Resetting the clock: The dynamics of organizational change and failure.” Administrative Science Quarterly 38 (1): 51–73.Google Scholar
Astley, W. Graham. 1985. “The two ecologies: Population and community perspectives on organizational evolution.” Administrative Science Quarterly 30 (2): 224–241.Google Scholar
Astley, W. Graham and Van de Ven, Andrew H. 1983. “Central perspectives and debates in organization theory.” Administrative Science Quarterly 28 (2): 245–273.Google Scholar
Audia, Pino G., Locke, Edwin A., and Smith, Ken G. 2000. “The paradox of success: An archival and a laboratory study of strategic persistence following radical environmental change.” Academy of Management Journal 43 (5): 837–853.Google Scholar
Bailey, Elizabeth E., Graham, David R., and Kaplan, Daniel P. 1985. Airline Deregulation. Cambridge, Massachusetts: MIT Press.Google Scholar
Beck, Nikolaus, Bruderl, Josef, and Woywode, Michael. 2008. “Momentum or deceleration? Theoretical and methodological reflections on the analysis of organizational change.” Academy of Management Journal 51 (3): 413–435.Google Scholar
Brown Johnson, Nancy and Anderson, Jonathan R. 2004. “Airline employment, productivity, and working conditions following deregulation.” In Transportation Labor Issues and Regulatory Reform, Vol. 10, edited by Peoples, James and Talley, Wayne. Oxford, United Kingdom: Elsevier.Google Scholar
Byrnes, Jonathan L.S. 1985. Diversification Strategies for Regulated and Deregulated Industries. Lexington, Massachusetts: Lexington Books.Google Scholar
Carroll, Glenn R. 1987. Publish or Perish: The Organizational Ecology of Newspaper Industries. Greenwich, Connecticut: JAI Press.Google Scholar
Chen, Ming-Jer and Hambrick, Donald C. 1995. “Speed, stealth, and selective attack: How small firms differ from large firms in competitive behavior.” Academy of Management Journal 38 (2): 453–482.Google Scholar
Delmas, Magali, Russo, Michael V., and Montes-Sancho, Maria J. 2007. “Deregulation and environmental differentiation in the electric utility industry.” Strategic Management Journal 28 (2): 189–209.Google Scholar
Gersick, Connie J.G. 1991. “Revolutionary change theories: A multilevel exploration of the punctuated equilibrium paradigm.” Academy of Management Review 16 (1): 10–36.Google Scholar
Gittell, Jody H., Cameron, Kim, Lim, Sandy, and Rivas, Victor. 2006. “Relationships, layoffs, and organizational resilience: Airline industry responses to September 11.” The Journal of Applied Behavioral Science 42 (3): 300–329.Google Scholar
Gittell, Jody H., Nordenflycht, Andrew V., and Kochan, Thomas A. 2004. “Mutual gains or zero sum? Labor relations and firm performance in the airline industry.” Industrial and Labor Relations Review 57 (2): 163–180.Google Scholar
Goll, Irene, Brown Johnson, Nancy, and Rasheed, Abdul A. 2007. “Knowledge capability, strategic change, and firm performance: The moderating role of the environment.” Management Decision 45 (2): 161–179.Google Scholar
Goll, Irene, Brown Johnson, Nancy, and Rasheed, Abdul A. 2006. “Strategic responses to deregulation and their performance implications in the U.S. airline industry.” Business and Politics 8 (2): article 2.Google Scholar
Goll, Irene and Rasheed, Abdul A. 2011. “The effects of 9/11/2001 on business strategy variability in the U.S. air carrier industry.” Management Decision 49 (6): 948–961.Google Scholar
Goll, Irene, Brown Johnson, Nancy, and Rasheed, Abdul A. 2008. “Top management team demographic characteristics, business strategy, and firm performance in the U.S. airline industry: The role of managerial discretion.” Management Decision 46 (2): 201–222.Google Scholar
Hannan, Michael and Freeman, John. 1977. “The population ecology of organizations.” American Journal of Sociology 82 (5): 929–964.Google Scholar
Hannan, Michael and Freeman, John. 1984. “Structural inertia and organizational change.” American Sociological Review 29 (2): 149–164.Google Scholar
Haveman, Heather A. 1992. “Between a rock and a hard place: Organizational change and performance under conditions of fundamental environmental transformation.” Administrative Science Quarterly 37 (1): 48–75.Google Scholar
Haveman, Heather A., Russo, Michael V., and Meyer, Alan D. 2001. “Organizational environments in flux: The impact of regulatory punctuations on organizational domains, CEO succession, and performance.” Organization Science 12 (3): 253–273.Google Scholar
Ito, Harumi and Lee, Darin. 2005. “Assessing the impact of the September 11 terrorist attacks on U.S. airline demand.” Journal of Economics and Business 57 (1): 75–95.Google Scholar
Johnson, Nancy Brown, Bobko, Philip, and Sambharya, Rakesh B. 1989. “Deregulation, business strategy, and wages in the airline industry.” Industrial Relations 28 (3): 419–430.Google Scholar
Keck, Sara L. and Tushman, Michael L. 1993. “Environmental and organizational context and executive team structure.” Academy of Management Journal 36 (6): 1314–1344.Google Scholar
Kelly, Dawn, and Amburgey, Terry L. 1991. “Organizational inertia and momentum: A dynamic model of strategic change.” Academy of Management Journal 34 (3): 591–612.Google Scholar
Levine, Michael E. 1987. “Airline competition in deregulated markets: Theory, firm strategy, and public policy.” Yale Journal on Regulation 4: 393–494.Google Scholar
Levinthal, Daniel A. and March, James G. 1993. “The myopia of learning.” Strategic Management Journal 14 (S2): 95–112.Google Scholar
Mahon, John F. and Murray, Edwin A. 1981. “Strategic planning for regulated companies.” Strategic Management Journal 2 (3): 251–262.Google Scholar
Meyer, Alan D. 1982. “Adapting to environmental jolts.” Administrative Science Quarterly 27 (4): 515–537.Google Scholar
Meyer, Alan D., Brooks, Geoffrey R., and Goes, James B. 1990. “Environmental jolts and industry revolutions: Organizational responses to discontinuous change.” Strategic Management Journal 11: 93–110.Google Scholar
Miles, Raymond E. & Snow, Charles C. 1978. Organizational Strategy, Structure, and Process. New York: McGraw-Hill.Google Scholar
Miller, Danny. 1982. “Evolution and revolution: A quantum view of structural change in organizations.” Journal of Management Studies 19 (2): 131–151.Google Scholar
Milliken, Frances. J. 1987. “Three types of perceived uncertainty about the environment: State, effect, and response uncertainty.” Academy of Management Review 12 (1): 133–143.Google Scholar
Nath, Deepika and Newell, Stephanie E. 1998. “Organizational responses to a hypercompetitive environment: A case study of Pepsi Canada.” Journal of Business Research 41 (1): 41–48.Google Scholar
Peteraf, Margaret and Reed, Randal. 2007. “Managerial discretion and internal alignment under regulatory constraints and change.” Strategic Management Journal 28 (11): 1089–1112.Google Scholar
Porter, Michael E. 1980. Competitive Strategy. New York: Free Press.Google Scholar
Porter, Michael E. 1985. Competitive Advantage. New York: Free Press.Google Scholar
Rajagopalan, Nandini and Spreitzer, Gretchen. 1997. ‘Toward a theory of strategic change: A multi-lens perspective and integrative framework.” Academy of Management Review 22 (1): 48–79.Google Scholar
Ramaswamy, Kannan, Thomas, Anisya S., and Litschert, Robert J. 1994. “Evaluating the relationship between strategy and performance in regulated contexts.” Strategic Management Journal 15: 63–74.Google Scholar
Romanelli, Elaine. 1989. “Organizational birth and population variety: A community perspective in origins.” In Research in Organizational Behavior, Vol. 11, edited by Cummings, L. L. and Staw, Barry M. Greenwich, Connecticut: JAI Press.Google Scholar
Romanelli, Elaine and Tushman, Michael L. 1994. “Organizational transformation as punctuated equilibrium: An empirical test.” Academy of Management Journal 37 (5): 1141–1166.Google Scholar
Sine, Wesley D. and David, Robert J. 2003. “Environmental jolts, institutional change, and the creation of entrepreneurial opportunity in the U.S. electric power industry.” Research Policy 32: 185–207.Google Scholar
Smith, Ken G. and Grimm, Curtis M. 1987. “Environmental variation, strategic change and firm performance: A study of railroad deregulation.” Strategic Management Journal 8 (4): 363–376.Google Scholar
Stata. 1985-2005. Longitudinal/Panel Data. Release 9. College Station, Texas: StataCorp.Google Scholar
Staw, Barry M., Sandelands, Lance E., and Dutton, Jane E. 1981. “Threat-rigidity effects in organizational behavior: A multilevel analysis.” Administrative Science Quarterly 26 (4): 501–524.Google Scholar
Strandholm, Karen, Kumar, Kamalesh, and Subramanian, Ram. 2004. “Examining the interrelationships among perceived environmental change, strategic response, managerial characteristics, and organizational performance.” Journal of Business Research 57 (1): 58–68.Google Scholar
Tosi, Henry L., and Slocum, John W. 1984. “Contingency theory: Some suggested directions.” Journal of Management 10 (1): 9–26.Google Scholar
Tushman, Michael L. and Romanelli, Elaine. 1985. “Organizational evolution: A metamorphosis model of convergence and reorientation.” In Research in Organizational Behavior, Vol. 7, edited by Cummings, L.L. and Staw, Barry M. Greenwich, Connecticut: JAI Press.Google Scholar
U.S. Department of Energy. Selected Years. Annual Energy Review. Washington, D. C.Google Scholar
U.S. Department of Transportation. Selected Years. Air Carrier Financial Statistics. Washington, D.C.Google Scholar
U.S. Department of Transportation. Selected Years. Air Carrier Statistics. Washington, D. C.Google Scholar
Vietor, Richard H.K. 1989. Strategic Management in the Regulatory Environment: Cases and Industry Notes. Englewood Cliffs, New Jersey: Prentice Hall.Google Scholar
Winston, Clifford. 1998. “U.S. industry adjustment to economic deregulation.” Journal of Economic Perspectives 12 (3): 89–110.Google Scholar
Zajac, Edward J., Kraatz, Matthew S., and Bresser, Rudi F. 2000. “Modeling the dynamics of strategic fit: A formative approach to strategic change.” Strategic Management Journal, 21 (4): 429–454.Google Scholar
Zuniga-Vicente, Jose A., de la Fuente-Sabate, Juan M., and Suarez Gonzalez, Isabel. 2004. “Dynamics of the strategic group membership-performance linkage in rapidly changing environments.” Journal of Business Research 57 (2): 1378–1390.Google Scholar