Business failure pathways: Environmental stress and organizational response

Business Failure and Entrepreneurship: Emergence, Evolution and Future Research

“…These models differ greatly from prediction models; they are not concerned with predicting failure before its onset but with charting the stages of failure as it progresses through the business. Also unlike the large datasets employed for prediction models, organisational decline models employed smaller datasets (see Table 3.2); some emerged from a single case-study [Sheppard and Chowdhury, 2005] whilst others adopt a matched-pairs technique totalling multiples of ten [Moulton et al, 1996]. The primary objective of these studies is to understand the process nature of failure through the perspective of the management team.…”

“…The seminal study developed three failure trajectory models and archetypical process stories that encapsulated the basic sequence of events that started each firm on its respective failure trajectory [Argenti, 1976, p. 121]. This set the foundation for a handful of studies that endeavoured to formulate the ultimate trajectory, pathway and/or pattern of failure [Miller, 1977, Sharma and Mahajan, 1980, Hambrick and D'Aveni, 1988, D'Aveni, 1989, Weitzel and Jonsson, 1989, Miller, 1992, Richardson et al, 1994, Moulton et al, 1996, Mellahi, 2005. However over a decade later D'Aveni [1989] noted that Argenti's findings were still awaiting confirmation and further explanation.…”

Corporate distress and turnaround: integrating the literature and directing future research

“…Thomas and Ramaswamy (1993) conclude that organizational context is a pivotal determinant of organizational change. Moulton et al (1996) further argue that firm effects dominate industry effects in explaining failure. Coucke et al (2007) find that age, labor intensity, profitability, and size are the most influential moderators for turnaround actions' effectiveness.…”

“…Andrade and Kaplan (1998) pursue this argument by concluding that economic shocks drive higher distress costs, significantly influencing the chosen strategy's effectiveness. However, Moulton et al (1996) and Knott and Posen (2005) argue that distressed firms generate externalities that significantly reduce industry-wide costs, eventually leading to beneficial economic effects.…”

Firm Bankruptcy Probability and Causes: An Integrated Study

“…The few available studies of this type (see e.g. Hambrick & D'Aveni, 1988;Moulton, Thomas, & Pruett, 1996) do not apply complex indicators of decline or the whole spectrum of possible causes of failure. Thus, this current study aims to be the first to relate the actual causes of failure to a firm's failure risk and its actual onset as reflected through its bankruptcy scores prior to failure.…”