The impact of performance distress on aggressive competitive behavior: a reconciliation of conflicting views

Abstract

Prior research on how ex ante performance impacts competitive behavior has led to conflicting conclusions. Prospect theory, for example, suggests that poor performance promotes aggressive behavior, whereas threat-rigidity theory predicts the opposite. We attempt to reconcile these conflicting views by incorporating a contingency perspective that empirically tests, specifically, how top management team heterogeneity and a favorable industry context moderate the relationship between poor performance and competitive aggressiveness. Our findings suggest that performance-distressed firms managed by heterogeneous top management teams are less likely to compete aggressively. However, contrary to predictions, performance-distressed firms competing in competition-buffered industries are more likely to compete aggressively. Copyright © 2002 John Wiley & Sons, Ltd.

A Influência da Competitividade Agressiva no Desempenho da Empresa Varejista

“…There is yet another current which follows the dynamic competitiveness line within the business strategy area focused on the strategy idea as competitive action (Ferrier et al, 2002). Consistent with the corporate entrepreneurial vision and hyper-competitiveness, the aggressiveness through the number of competitive actions and the speed with which they are implemented, in terms of starting an attack or to respond to the competitor, were found as being the strongest, the most consistent and the most robust construct in the dynamic competitiveness line (Ferrier et al, 2002).…”

“…In this case, the attack speed and of multiple and competitive strategic tactics will be beneficial to the company performance. Thus, aggressive companies try to overcome their rivals in the market acting quickly, proactively and with strength (Ferrier et al, 2002).…”

“…If on the one hand, some studies suggest that successful companies compete more proactively and aggressively, on the other hand, other studies show that companies presenting decline are more motivated for an aggressive competition (Covin & Slevin, 1989Ferrier et al, 2002. At the same time the study of Covin and Slevin (1991) indicates that aggressive companies when compared with conservative companies, presented higher averages in relation to foreign financing, services, warranties, advertising, innovative marketing, price, product quality, patent and innovative operations.…”

“…However, the literature review of Ferrier et al (2002) showed that empirical studies have shown conflicting results.…”

Bankruptcy Via Earning Volatility: Does it Integrate in Financial Institutions?

“…Altman (1968) said it is a "composite measure of profitability, cash flow, slack, and stock market factors. Ferrier et al (2002) disclosed that high scores of Altman"s Z score represented strong financial health. On the other hand, low scores directed financial distress.…”