When firms face declining financial performance, research suggests that cost and asset retrenchment can lead to improved performance among poorly performing firms. However, previous studies have largely focused on firms operating in mature industries. This research develops and tests arguments that cost and/or asset retrenchment strategies will have different effects on firm performance in competitive environments characterized as growing and declining. In growth industries, asset retrenchment was positively related to performance improvement while cost retrenchment was unrelated. In declining industries, cost retrenchment was positively related to improved performance while asset retrenchment had a negative effect on firm performance. Implications of these findings for turnaround strategies are discussed.

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Firms that have failed to meet the performance expectations of investors must seek new ways of creating value or face the loss of financial support. Using resource-based arguments, we find that valuable and difficult-to-imitate strategies that recombine the firm's existing stock of resources to create new products, processes, or technologies have a positive effect on organizational recovery as measured by investors' expectations. Similarly, acquiring new resources through mergers or acquisitions also has positive effects on investors' expectations. In contrast, valuable and difficult-to-imitate strategies that provide the firm with access to new resources through alliances or joint ventures do not affect investors' expectations of performance. We also find that taking actions that are not valuable and difficult-to-imitate either have no effect on performance or may lead to further performance declines. Lastly, our results show that valuable and difficultto-imitate strategic actions that use existing resources in new ways contribute the most to organizational recovery.

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Most research in strategic management operationalizes firm financial performance by using either accountingor market-based measures. Recently, some have suggested that subjective measures may be useful in assessing a firm's jitiancial performance. We argue that there is a theoretical basis f o r viewiiig firm jinancial performance as having a higher order structure consisting of three separate yet distinct dinzensions. Using second-order coiijirniatoiy factor analysis, we found that while differences exist among accounting, market, and subjective measures of firm jitiancial performance, there is evidence to support the concept of a single utiderlying coiistruct. While our findings are statistica1l)l sigtiijicatit arid thus support our hypotheses, the substantive nature of our results suggests that much more research is needed before we fully uriderstarid the dinierisioiiality of firm financial perforniaiice.