D. Keith Robbins

Entrepreneurial recovery strategies of small market share manufacturers

Abstract Field studies of organizational decline and turnaround have provided evidence that economically troubled firms can undertake recovery from sharp financial losses in different ways. As suggested by a recent stream of research, the most promising of these ways is for businesses that have retrenched to initiate recovery strategies designed to redirect their remaining resources toward more promising product-market combinations. The choice of this set of alternatives, known as entrepreneurial recovery strategies, is the topic of the research that was undertaken. Entrepreneurial recovery strategies involve reformulation of a firms products, services, markets, or principal technologies in ways that represent a new or radically altered competitive posture. They are contrasted to efficiency recovery strategies that entail retaining the current product-market-technology orientation but on a smaller and more efficient scale. As these descriptions suggest, the thrust of research on recovery strategies has been to merge the findings from entrepreneurship studies on new venture creation and corporate intrapreneurship with strategic management studies on retrenchment and recovery. Our project extends this process by treating recovery strategies as the central element in a turnaround model. The research was specifically designed to address two research questions: 1. Which functional areas are most emphasized by small market share (SMS) firms that pursue entrepreneurial versus efficiency recovery strategies? 2. What are the performance implications for adopting entrepreneurial versus efficiency recovery strategies for mature-industry, SMS manufacturers based on the cause of the performance downturn? The research questions were investigated through an empirical analysis of 32 companies, each of which controlled less than 1% of their mature manufacturing industrys total sales. Two executives from each of these companies responded to a 162-item questionnaire designed to assess the cause of a downturn that occurred anytime during the period of 1976–1985, any changes in strategy components during the recovery, and the emphasis placed on specific functional level activities during the response to the decline. Additionally, objective measures of performance were used to assess the performance implications of entrepreneurial and efficiency strategies. The major findings from the research included: (1) a high degree of strategy change among the participant firms; (2) a focus on marketing and production functional areas by SMS firms that pursued entrepreneurial recovery strategies, and a focus on finance and management functional areas for SMS firms that pursued efficiency recovery strategies; and (3) a relatively poor level of performance among SMS firms that pursued entrepreneurial recovery strategies. The main implication from the study is that SMS companies in mature manufacturing industries should consider the adoption of efficiency-oriented recovery strategies to foster economic revival. The research should be replicated in industries that vary both technologically and in stage of life cycle to determine if entrepreneurial strategies represent more viable alternatives in certain other turnaround situations or for other industry populations.

Entrepreneurial retrenchment among small manufacturing firms

Abstract Strategic management researchers have traditionally focused on growth-oriented strategies for small firms. Yet studies of small businesses have consistently cited overzealous pursuit of growth as the number one contributor to financial decline and failure. Record numbers of small firms are finding themselves confronted with declines of sufficient magnitude to require the implementation of turnaround strategies. Much has been written about turnaround strategies for large corporations—the problem is that the commonly recommended turnaround strategies are not often feasible for small firms. Unfortunately, there are no investigations reported in the literature that approach the subject of turnaround from the perspective of the small-market-share businesses. The purpose of this research was to explore turnaround from the small firm perspective. The study focused on the turnaround strategy most often referred to as entrepreneurial retrenchment, i.e., the aggressive pursuit of cost and asset reduction. The results showed that firms that pursued entrepreneurial retrenchment were more successful than firms that continued to pursue growth with the preexisting configuration of assets, even after a period of extensive cost cutting. The findings suggest strongly that managers of successful small-market-share firms must be able to quickly recognize and ameliorate underper forming assets when they encounter turnaround situations. The findings were a result of empirical analyses of 33 small-market-share firms that had encountered turnaround situations. Turnaround situations were initially identified by the incidence of at least two successive years of declining profitability that exceeded any industry-wide decline that may have occurred over the same time period. The firms were subsequently contacted to verify that they considered the timeframe to indeed coincide with a period during which their managerial actions were targeted to achieve a performance turnaround. Each of the firms was then classified according to the direction of their cost and asset changes over the turnaround period. Nonretrenchers were those firms that did not achieve net reductions in costs or assets for any years after the decline. Cost retrenchers were those firms that achieved net costs reductions but not asset reductions for a minimum of one year succeeding the decline. Finally, entrepreneurial retrenchers were those firms that sustained a minimum of one year of asset reductions in addition to cost reductions in the years immediately after the decline. Although entrepreneurship research has traditionally focused on developing and investing in new businesses, little has been done on the issue of asset restructuring that precedes entrepreneurial endeavors in established companies (Robinson and Pearce 1988). For single businesses the essence of entrepreneurship is the ability to quickly respond to marketplace opportunities. The underside of this pursuit is the ability to quickly reposition assets to accompany ensuing moves for competitive viability. For single business firms, an inability to respond quickly to financial downturns creates turnaround situations. Therefore, an examination was prepared to determine the value of retrenchment as a means to achieve turnaround and financial stability. The results were produced through an analysis of longitudinally collected financial data that was used to profile each firms turnaround situation severity, their classification of retrenchment, and the degree to which they were able to successfully achieve a return to predownturn financial performance.

Business School Curricular Responses to the Emergence of Electronic Commerce

Abstract The latest innovation to draw the attention of business schools and their stakeholders is electronic commerce (e-commerce). The purpose of this paper is to examine how business schools are responding to the curriculum challenge of e-commerce. The results indicate that business schools are initiating three types of responses: The first concerns programmatic changes. The second concerns changes in the disciplines of management information systems, marketing, operations management, and accounting. The third response is the establishment of centers/institutes of e-commerce. Before we report on these responses, we present an overview of e-commerce. After our responses, we present a summary of our results and predict future trends.