A Process Perspective on Organizational Failure: A Qualitative Meta‐Analysis

• Date: 01 January 2019
• Author: Stefanie Habersang,Christoph Seckler,Markus Reihlen,Jill Küberling‐Jost
• Published date: 01 January 2019
• DOI: http://doi.org/10.1111/joms.12341

A Process Perspective on Organizational Failure:

A Qualitative Meta-Analysis

Stefanie Habersang, Jill K€uberling-Jost, Markus Reihlen

and Christoph Seckler

Leuphana University of L€uneburg

ABSTRACT An important stream of the organizational failure literature has proposed process

models to describe how firms fail. Despite much progress, this stream is currently at a

crossroads. Previous process models try to capture how failure unfolds in singular models that

describe organizational failure as the result of either inertia or extremism or as a mixture of

both. However, it remains unclear how these competing explanations are related and what

underlying mechanisms explain why organizational failure processes unfold as they do. We

address these issues by examining failure processes using a qualitative meta-analysis research

design. The qualitative meta-analysis allows us to analyse and synthesize the wealth of

previously published single-case studies in order to develop process models of organizational

failure. The most salient finding of our analysis is that failure processes converge around four

distinct process archetypes, which we name imperialist, laggard, villain, and politicized. Each

process archetype can be explained by the interplay of distinct rigidity and conflict

mechanisms. Differentiating the four process archetypes and explaining the underlying

mechanisms helps to resolve some contradictions in the previous failure process literature.

Keywords:

INTRODUCTION

A fundamental question that has puzzled organization and management scholars is:

how and why do organizations fail (e.g., Josefy et al., 2017; Mellahi and Wilkinson,

2010; Whetten, 1980). In this study, we define organizational failure as (1) an involun-

tary cessation of operations, (2) the insolvency of an organization, or (3) an involuntary

change in ownership (Josefy et al., 2017). To understand failure, scholars have adopted

various theoretical perspectives, which can be roughly grouped into externally and

Address for reprints: Christoph Seckler, Institute of Management & Organization, Leuphana University of

L€uneburg, Universit€atsallee 1, 21335 L€uneburg, Germany (seckler@leuphana.de).

All authors contributed equally, and they are listed in alphabetical order.

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doi: 10.1111/joms.12341

Organizat ional

failure, qualit ative meta-analysis, proces s perspective, mechanisms

Journal of Management Studies 5 :6 1 January 2019

internally driven approaches (Mellahi and Wilkinson, 2004, 2010). Externally driven

approaches examine how certain environmental conditions or situational factors lead to

organizational failure (Heracleous and Werres, 2016; Mellahi and Wilkinson, 2010).

For instance, in population ecology theory, the external environment selects those

organizations out that are unfit with respect to environmental conditions (e.g., Hannan

and Freeman, 1984, 1988). In a similar vein, in industrial organization theory (e.g.,

Anderson and Tushman, 2001), industry conditions create deterministic pressure for

strategic adaptation and survival. Likewise, new institutionalism has shifted our attention

to the normative, cultural, and regulative elements (Scott, 2001) of institutions shaping

or constituting organizational actions (Oertel et al., 2016). In contrast, scholars adopting

an internally driven approach place strong emphasis on the decisions and actions of

organizational members (Mellahi and Wilkinson, 2004, 2010). Internal approaches fre-

quently draw on upper echelon theory and explore the role of top management teams

(Hambrick and D’Aveni, 1992; Hambrick and Mason, 1984) and outline the role of

strategic decisions such as founder succession (Haveman and Khaire, 2004), resource

allocation (Christensen and Bower, 1996), or the simultaneous introduction of multiple

products (Barnett and Freeman, 2001).

Traditionally cutting across these external-internal approaches (Mellahi and

Wilkinson, 2004, 2010) is a stream that developed process models of organizational fail-

ure (Hambrick and D’Aveni, 1988; Heracleous and Werres, 2016; Weitzel and Jonsson,

1989). Contrary to variance models ‘dealing with covariation among dependent and

independent variables’ (Langley et al., 2013, p. 2), process models attempt to capture

the sequence of certain conditions and events in explaining how failure unfolds over

time (Langley, 1999). The notion here is that it is important to theorize about the

sequence over time (Mitchell and James, 2001) because an incident such as an inad-

equate leadership decision may have very different implications for an organization

depending on the timing of the decision making (e.g., in times of a booming industry vs.

declining industry) (Hambrick and D’Aveni, 1988, 1992). Trying to capture how certain

conditions and events occur over time, process models traditionally include both exter-

nal (e.g., population density and entry of new competitors) and internal aspects (e.g.,

organizational inertia and cognitive bias) in their theorizing (e.g., Hambrick and

D’Aveni, 1988; Tripsas, 2009; Weitzel and Jonsson, 1989). Based on these characteris-

tics, some scholars even argue that process models may be well-suited to overcome the

prevailing and long-lamented external-internal dichotomy (Amankwah-Amoah, 2016;

Mellahi and Wilkinson, 2004, 2010).

While we agree with these scholars about the strong potential of process models to

explain organizational failure (Hambrick and D’Aveni, 1988; Heracleous and Werres,

2016; Tripsas, 2009; Weitzel and Jonsson, 1989), this stream of literature is currently at

a crossroads. Most previous process models try to capture the paths to failure in one sin-

gular process model (Amankwah-Amoah, 2016; Hambrick and D’Aveni, 1988; Heracl-

eous and Werres, 2016; Tripsas, 2009; Weitzel and Jonsson, 1989), which tends to fall

into one of two competing patterns. Whereas some portray failure as characterized by

organizational inertia, i.e., the tendency of an organization to remain stable (e.g.,

Tripsas, 2009; Weitzel and Jonsson, 1989), others characterize failure rather as an extre-

mism pattern, i.e., the tendency of an organization to change radically (e.g., Heracleous

2 S. Habersang et al.

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and Werres, 2016). Somewhere in between these two models is the downward spiral

developed by (Hambrick and D’Aveni, 1988) and the extended downward spiral by

Amankwah-Amoah (2016), which portray organizational failure as a mix of both inertia

and extremism patterns.

Upon closer scrutiny, the competing inertia-extremism explanations in previous stud-

ies may be the result of two aspects. First, previous process studies tend to rely on a small

case base (e.g., Heracleous and Werres, 2016; Tripsas, 2009) or adopt a purely concep-

tual approach (e.g., Amankwah-Amoah, 2016; Weitzel and Jonsson, 1989), thus limiting

the generalizability and empirical support. Second, previous process models remain

rather descriptive (Amankwah-Amoah, 2016; Hambrick and D’Aveni, 1988; Heracleous

and Werres, 2016; Weitzel and Jonsson, 1989). They do not specify the underlying

mechanisms, i.e., processes that bring about or prevent change (Bunge, 1999; Van De

Ven and Poole, 1995), in explaining the failure process. Although this would lead some

scholars to even question whether they are proper explanatory process models (Langley

et al., 2013; Van De Ven and Poole, 1995), the more direct problem is that without

specifying the underlying mechanisms, it is difficult to properly differentiate processes of

organizational failure (e.g., Van De Ven and Poole, 1995).

We address both of these issues by examining failure processes in a qualitative meta-

analysis (Hoon, 2013; Rauch et al., 2014). A qualitative meta-analysis is an exploratory,

abductive research method (Mantere and Ketokivi, 2013) that allows us to synthesize

primary qualitative empirical data from case studies. The aim is to re-examine previ-

ously published case studies to generate new theory through the identification of recur-

ring patterns across the re-examined cases (Hoon, 2013; Rauch et al., 2014).

Theoretically guided by ideas about extant research on organizational failure as well as

process theorizing and the role of mechanisms in explaining processes of organizational

change (e.g., Langley et al., 2013; Van De Ven and Poole, 1995), we empirically exam-

ine organizational failures across 43 published cases. A salient finding is that the failure

processes converge towards four distinct process archetypes, which we name imperialist,

laggard,villain, and politicized. Examining the four process archetypes in more detail sug-

gests that each of them can be explained by a distinct sequence of rigidity and conflict

mechanisms. Whereas rigidity mechanisms refer to converging processes and conflict

mechanisms refer to diverging processes, we find that both processes are capable of

bringing about or preventing change (Bunge, 1999; Van De Ven and Poole, 1995). Fur-

thermore, our findings suggest that it is the distinct sequence of rigidity and conflict

mechanisms over time that explains why firms fail.

This study makes two main contributions. First, we advance the literature on organi-

zational failure processes by moving from singular process models (Amankwah-Amoah,

2016; Hambrick and D’Aveni, 1988; Heracleous and Werres, 2016; Weitzel and

Jonsson, 1989) to four more differentiated process archetypes. The more specific process

archetypes allow us to resolve contradictions around the competing inertia and extre-

mism patterns (e.g., Hambrick and D’Aveni, 1988; Tripsas, 2009; Weitzel and Jonsson,

1989) by producing a more differentiated picture. Whereas on a high level of abstrac-

tion, the four process models resonate with the inertia and extremism surface patterns

(inertia: laggard and politicized; extremism: imperialist and villain), our findings indicate that

this distinction alone may actually be inadequate. This is because all of the four process

3A Process Perspective on Organizational Failure

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