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JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.. Tushman made helpful comments on earlier drafts. Special gratitude is owed to Ian MacMillan for his substantial help in the matched-pair selection process. This exploratory study of 57 large bankruptcies and 57 matched survivors examined the dynamics of major corporate failure. Prior research was used to guide selection of the four major constructs studied: domain initiative, environmental carrying capacity, slack, and performance. What emerges is a clear portrayal of a protracted process of decline, aptly portrayed by prior theorists, and modeled here, as a downward spiral. In the firms studied, significant features of the downward spiral included early weaknesses in slack and performance, extreme and vacillating strategic actions, and abrupt environmental decline. An elaboration of the last two stages of decline is also presented, based on the findings from this study. The downward-spiral model is then illustrated with a case example. The study sheds light on major debates and dilemmas in the fields of organization theory and strategy regarding why major firms fail.'

This exploratory study of 57 large bankruptcies and 57 matched survivors examined the top management team (TMT) characteristics associated with major corporate failure. Prior research was used to guide selection of specific team characteristics for study. Not only did the failing firms show significant annual, or cross-sectional, divergence from survivors on several indicators of TMT composition, but also those divergences became more pronounced, even accelerating, over the last five years of the bankrupts' lives. The results thus suggest that deterioration of the top management team is a central element of the downward spiral of large corporate failures. Based upon a limited test of causality, the authors propose that a two-way process is at work: (1) team deficiencies bring about or aggravate corporate deterioration, either through strategic errors or stakeholder uneasiness with the flawed team; and (2) corporate deterioration brings about team deterioration, through a combination of voluntary departures, scapegoating, and limited resources for attracting new executive talent.top management teams, executive leadership, organizational decline, bankruptcy