This paper identifies specific types of dynamic capabilities that enable tourism firms to survive the crisis caused by the Libyan civil war. The literature on dynamic capabilities has matured, but little is known about the specific types of dynamic capabilities that enable firms to survive turbulent conditions. Using case studies of eight Libyan tourism firms, we find that ongoing interactions between firms and their environments and the specific actions taken by managers and employees are crucial to firms' survival and adaptation to the new environment. Our paper makes a theoretical contribution to the dynamic capabilities and crisis management literature.
Purpose
Penrose’s argument regarding the managerial constraint on continual expansion over two consecutive periods is termed the “Penrose effect,” a relatively less investigated premise in Penrose’s growth theory. The purpose of this paper is to empirically re-examine the Penrose effect from the perspective of upper echelons theory and investigated how top management team (TMT) composition influences the continual growth of a firm.
Design/methodology/approach
This study empirically tested the hypotheses based on a sample of listed manufacturing firms operating in Taiwan, a newly industrialized economy in the Asia–Pacific region. Moderated hierarchical regression analyses were applied to test hypotheses.
Findings
The empirical results suggest that low TMT diversity (in terms of educational, functional and team tenure diversity) is likely to engender a situation in which the Penrose effect might occur. Additionally, the results indicate that the proportion of functional executives plays a significant role in influencing the growth trend over two consecutive periods and may soften the impact of the Penrose effect.
Practical implications
This paper suggests that appropriate structuring of TMTs and appropriate management of their members’ backgrounds and team tenure diversity can help firms overcome the Penrose effect and grow continually. Furthermore, the proportion of functional executives in a TMT is influential.
Originality/value
This paper uniquely contributes to the theoretical and empirical development of Penrose’s growth theory, upper echelons theory and resource-based view concerning managerial resources.
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