Hostname: page-component-78c5997874-s2hrs Total loading time: 0 Render date: 2024-11-11T03:07:44.314Z Has data issue: false hasContentIssue false
  • English
  • Français

Strategic Responses to Deregulation and Their Performance Implications in the U.S. Airline Industry

Published online by Cambridge University Press:  20 January 2017

Irene Goll ,
Nancy Brown Johnson  and
Abdul A. Rasheed
Irene Goll*
Affiliation:
University of Scranton
Nancy Brown Johnson*
Affiliation:
University of Kentucky
Abdul A. Rasheed*
Affiliation:
University of Texas - Arlington
*
Kania School of Management, University of Scranton, Scranton, PA. 18510, e-mail: golli2@scranton.edu.
School of Management, University of Kentucky, Gatton College of Business and Economics, Lexington, KY. 40506–0034, e-mail: nbj@pop.uky.edu.
Abdul A. Rasheed, Department of Management, College of Business Administration, University of Texas at Arlington, Arlington, TX.76019, email: abdul@uta.edu.
Get access Rights & Permissions [Opens in a new window]

Abstract

This study examines the relationships between deregulation, business strategy (low cost, differentiation, and scope), size, and firm performance in the U.S. airline industry based on archival data for the Major, National, and Large Regional air carriers in the U.S. from 1972 to 1995. Cross-sectional time series regression analysis shows that deregulation had a significant impact on the strategic choices made by airlines. Results also support a significant relationship between business strategy and firm performance. Further, the study found that firm size moderates the environment-business strategy relationship and the business strategy-firm performance relationship, thereby supporting the salience of firm size as a contingency variable in strategy studies.

Keywords

business strategyairline industryfirm performanceorganizational size
Type
Article
Information
Business and Politics , Volume 8 , Issue 2 , August 2006 , pp. 1 - 37
Copyright
Copyright © V.K. Aggarwal 2006 and published under exclusive license to Cambridge University Press 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Air Transport Association. 2006. US airline bankruptcies: An unofficial compilation.Google Scholar
http://www.airlines.org/econ/d.aspx?nid=6207.Google Scholar
Aldrich, H. E. 1979. Organizations and Environments. Englewood Cliffs, NJ: Prentice-Hall.Google Scholar
Aldrich, H. and Auster, E. R. 1986. ‘Even dwarfs started small: Liabilities of age and size and their strategic implications’. In Research in Organizational Behavior, edited by Staw, B. M. and Cummings, L. L. Greenwich, CT: JAI Press, Vol. 8: 165–198.Google Scholar
Andrews, K. R. 1971. The Concept of Corporate Strategy. Homewood, IL: Dow-Jones-Irwin.Google Scholar
Audia, P. G., Locke, E. A., Smith, and K. G. 2000. ‘The paradox of success: An archival and a laboratory study of strategic persistence following radical environmental change.’ Academy of Management Journal 43 (5): 837–853.CrossRefGoogle Scholar
Bailey, E., Graham, D. R., Kaplan, and D. P. 1985. Airline Deregulation. Cambridge, MA: MIT Press.Google Scholar
Blau, P. M. 1970. ‘A formal theory of differentiation in organizations.’ American Sociological Review 35: 201–218.CrossRefGoogle Scholar
Byrnes, J. L. S. 1985. Diversification Strategies for Regulated and Deregulated Industries. Lexington, MA: Lexington Books.Google Scholar
Chen, M.-J. and Hambrick, D. C. 1995. ‘Speed, stealth, and selective attack: How small firms differ from large firms in competitive behavior.’ Academy of Management Journal 38: 453–482.CrossRefGoogle Scholar
Child, J. 1972. ‘Organizational structure, environment and performance: The role of strategic choice.’ Sociology 6: 2–22.CrossRefGoogle Scholar
Dean, T. J., Brown, R. L., Bamford, and C. E. 1998. ‘Differences in large and small firm responses to environmental context: Strategic implications from a comparative analysis of business formations.’ Strategic Management Journal 19 (8): 709–728.3.0.CO;2-9>CrossRefGoogle Scholar
Dess, G. and Davis, P. 1984. ‘Porter's generic strategies as determinants of strategic group membership and organizational performance.’ Academy of Management Journal 27: 465–488.CrossRefGoogle Scholar
Fiegenbaum, A. and Karnani, A. 1991. ‘Output flexibility-A competitive advantage for small firms.’ Strategic Management Journal 12 (2): 101–114.CrossRefGoogle Scholar
Finkelstein, S. and Hambrick, D. C. 1990. ‘Top-management-team tenure and organizational outcomes: The moderating role of managerial discretion.’ Administrative Science Quarterly 35: 505–538.CrossRefGoogle Scholar
Galbraith, J. and Kazanjian, R. 1986. Strategy Implementation. St. Paul, MN: West.Google Scholar
Ginsberg, A. and Venkatraman, N. 1985. ‘Contingency perspectives of organizational strategy: A critical review of the empirical research.’ Academy of Management Review 10 (3): 421–434.CrossRefGoogle Scholar
Guthrie, J. P., Grimm, C. M., Smith, and K. G. 1993. ‘Environmental change and management staffing: A reply.’ Journal of Management 19 (4): 889–987.CrossRefGoogle Scholar
Hambrick, D. C. and Finkelstein, S. 1987. ‘Managerial discretion: A bridge between polar views of organizations.’ In Research in Organizational Behavior, edited by Cummings, L. L. and Staw, B. M. Greenwich, CT: JAI Press, Vol. 9: 369–406 Google Scholar
Hambrick, D. C. and Lei, D. 1986. ‘Toward an empirical prioritization of contingency variables for business strategy.’ Academy of Management Journal 28: 763–788.CrossRefGoogle Scholar
Hambrick, D. C., MacMillan, I. C., Day, and D. L. 1982. ‘Strategic attributes and performance in the BCG matrix-A PIMS-based analysis of industrial product businesses.’ Academy of Management Journal 25 (3): 510–531.CrossRefGoogle Scholar
Hambrick, D. C. and Mason, P. A. 1984. ‘Upper echelons: The organization as a reflection of its top managers.’ Academy of Management Review 9: 193–206.CrossRefGoogle Scholar
Hamermesh, R. G., Anderson, M. J., Harris, and J. E. 1978. ‘Strategies for low market share businesses.’ Harvard Business Review 56 (3): 95–102.Google Scholar
Hannan, M. T. and Freeman, J. 1977. ‘The population ecology of organizations.’ American Journal of Sociology 82: 929–964.CrossRefGoogle Scholar
Hannan, M. T. and Freeman, J. 1984. ‘Structural inertia and organizational change.’ American Sociological Review 49 (2): 149–164.CrossRefGoogle Scholar
Hart, S. L. 1995. ‘A natural-resource-based view of the firm.’ Academy of Management Review 20 (4): 986–1014.CrossRefGoogle Scholar
Haveman, H. A. 1992. ‘Between a rock and a hard place: Organizational change and performance under conditions of fundamental environmental transformation.’ Administrative Science Quarterly 37 (1): 48–75.CrossRefGoogle Scholar
Haveman, H. A. 1993. ‘Organizational size and change: Diversification in the savings and loan industry after deregulation.’ Administrative Science Quarterly 38 (1), 20–50.CrossRefGoogle Scholar
Hofer, C. W. 1975. ‘Towards a contingency theory of business strategy.’ Academy of Management Journal 18: 784–810.CrossRefGoogle Scholar
Hofer, C. W. and Schendel, D. 1978. Strategy Formulation: Analytical Concepts. St. Paul, MN: West Publishing.Google Scholar
Homburg, C., Krohmer, H., Workman, and J. P. 1999. ‘Strategic consensus and performance: The role of strategy type and market-related dynamism.’ Strategic Management Journal 20 (4): 339–357.3.0.CO;2-T>CrossRefGoogle Scholar
Hrebeniak, L. G. and Joyce, W. F. 1985. ‘Organizational adaptation: Strategic choice and environmental determinism.’ Administrative Science Quarterly 30: 336–349.CrossRefGoogle Scholar
Johnson, N. B., Sambharya, R. B., Bobko, and P. 1989. ‘Deregulation, business strategy, and wages in the airline industry.’ Industrial Relations 28 (3): 419–430.CrossRefGoogle Scholar
Jones, G. R., Lamont, B. T., Pustay, M. W., Zajac, and E. J. 1998. ‘Strategic groups and intraindustry coordination: A longitudinal study of the airline industry, 1973–1983.’ Working Paper Texas A & M University.Google Scholar
Keck, S. L. and Tushman, M. L. 1993. ‘Environmental and organizational context and executive team structure.’ Academy of Management Journal 36: 1314–1344.CrossRefGoogle Scholar
Kim, L. and Lim, Y. 1988. ‘Environment, generic strategies, and performance in a rapidly developing country: A taxonomic approach.’ Academy of Management Journal 31: 802–827.CrossRefGoogle Scholar
Kimberly, J. R. 1976. ‘Organizational size and the structuralist perspective: A review, critique, and proposal.’ Administrative Science Quarterly 21 (4): 571–597.CrossRefGoogle Scholar
MacMillan, I. C., Hambrick, D. C., Day, and D. L. 1982. ‘The product portfolio and profitability-A PIMS-based analysis of industrial-product businesses.’ Academy of Management Journal 25 (4): 733–755.CrossRefGoogle Scholar
Mahon, J. F. and Murray, E. A. 1981. ‘Strategic planning for regulated companies.’ Strategic Management Journal 2 (3): 251–262.CrossRefGoogle Scholar
Miles, R. E. and Snow, C. C. 1978. Organizational Strategy, Structure, and Process. New York: McGraw-Hill.Google ScholarPubMed
Miller, D. and Chen, M.-J. 1994. ‘Sources and consequences of competitive inertia: A study of the U.S. airline industry.’ Administrative Science Quarterly 39: 1–23.CrossRefGoogle Scholar
Miller, D. and Friesen, P. H. 1986. ‘Porter's generic strategies and performance: An empirical examination with American data, part I: Testing Porter.’ Organization Studies 7: 37–55.CrossRefGoogle Scholar
Morrison, S.A. and Winston, C. 1987. ‘Empirical implications and tests of the contestability hypothesis.’ Journal of Law and Economics 30 (1): 53–67.CrossRefGoogle Scholar
Nickerson, J.A. and Silverman, B. S. 2003. ‘Why firms want to organize efficiently and what keeps them from doing so: Inappropriate governance, performance, and adaptation in a deregulated industry.’ Administrative Science Quarterly 48: 433–465.CrossRefGoogle Scholar
Peteraf, M.A. and Reed, R. 1994. ‘Pricing and performance in monopoly airline markets.’ Journal of Law and Economics 37 (1): 193–214.CrossRefGoogle Scholar
Petzinger, T. Jr. 1995. Hard Landing: The Epic Contest for Power and Profits that Plunged the Airlines into Chaos. New York: Times Business.Google Scholar
Pfeffer, J. and Salancik, G. R. 1978. The External Control of Organizations: A Resource Dependence Perspective. New York: Harper and Row.Google Scholar
Porter, M. E. 1980. Competitive Strategy. New York: Free Press.Google Scholar
Porter, M. E. 1985. Competitive Advantage. New York: Free Press.Google Scholar
Prahalad, C. K. and Hamel, G. 1990. ‘The core competence of the corporation.’ Harvard Business Review 68 (3): 79–91.Google Scholar
Prescott, J. E., Kohli, A. K., Venkatraman, and N. 1986. ‘The market share-profitability relationship: An empirical assessment of major assertions and contradictions.’ Strategic Management Journal 7 (4): 377–394.CrossRefGoogle Scholar
Ramaswamy, K., Thomas, A. S., Litschert, and R. J. 1994. ‘Evaluating the relationship between strategy and performance in regulated contexts.’ Strategic Management Journal 15: 63–74.CrossRefGoogle Scholar
Scherer, F. M. and Ross, D. 1990. Industrial Market Structure and Economic Performance. Boston, MA: Houghton Mifflin.Google Scholar
Shortell, S. M. and Zajac, E. J. 1990. ‘Perceptual and archival measures of Miles and Snow's strategic types: A comprehensive assessment of reliability and validity.’ Academy of Management Journal 33 (4): 817–832.CrossRefGoogle ScholarPubMed
Slater, S. F. and Olson, E. M. 2000. ‘Strategy type and performance: The influence of sales force management.’ Strategic Management Journal 21 (8): 813–829.3.0.CO;2-G>CrossRefGoogle Scholar
Smith, K. G. and Grimm, C. M. 1987. ‘Environmental variation, strategic change and firm performance: A study of railroad deregulation.’ Strategic Management Journal 8: 363–376.CrossRefGoogle Scholar
Smith, K. G., Grimm, C. M., Gannon, M. J., and Chen, M.-J. 1991. ‘Organizational information processing, competitive responses, and performance in the U.S. domestic airline industry.’ Academy of Management Journal 34 (1): 60–85.CrossRefGoogle Scholar
Smith, K. G., Guthrie, J. P., and Chen, M.-J. 1989. ‘Strategy, size, and performance.’ Organization Studies 10 (1): 63–81.CrossRefGoogle Scholar
Snow, C. C. and Hrebiniak, L. G. 1980. ‘Strategy, distinctive competence, and organizational performance’. Administrative Science Quarterly 25 (2): 317–336.CrossRefGoogle Scholar
Thompson, J. 1967. Organizations in Action. New York: McGraw-Hill.Google Scholar
Tushman, M. L. and Romanelli, E. 1985. ‘Organizational evolution: A metamorphosis model of convergence and reorientation’. In Research in Organizational Behavior, edited by Cummings, L L. and Staw, B. M. Greenwich, CT: JAI Press, Vol. 7: 171–222.Google Scholar
U.S. Department of Commerce. Selected Years. Bureau of Economic Analysis - Survey of Current Business. Washington, D. C.: Government Printing Office.Google Scholar
U.S. Department of Energy. Selected Years. Annual Energy Review. Washington, D. C.: Government Printing Office.Google Scholar
U.S. Department of Transportation. Selected Years. Air Carrier Financial Statistics. Washington, D. C.: Government Printing Office.Google Scholar
U.S. Department of Transportation. Selected Years. Air Carrier Traffic Statistics. Washington, D.C.: Government Printing Office.Google Scholar
U.S. Department of Transportation. Selected Years. FAA Statistics Handbook of Aviation. Washington, D.C.: Government Printing Office.Google Scholar
U.S. Department of Transportation. 1960, 1970, 1980, 1990, 1993, 1994, 1995. NTS Appendix A - Modal Profiles. Washington, D.C.: Government Printing Office.Google Scholar
U.S. Department of Transportation. Selected Years. Transportation Sector Establishments, Employment, Revenues, and Productivity. Washington, D.C.: Government Printing Office.Google Scholar
Venkatraman, N. and Prescott, J. E. 1990. ‘Environment-strategy coalignment: An empirical test of its performance implications.’ Strategic Management Journal 11 (1): 1–23.CrossRefGoogle Scholar
Woo, C. Y. and Cooper, A. C. 1981. ‘Strategies of effective low share businesses.’ Strategic Management Journal 2 (3): 301–318.CrossRefGoogle Scholar
Woo, C. Y. and Cooper, A. C. 1982. ‘The surprising case for low market share.’ Harvard Business Review 60 (6), 106–113.Google Scholar
Wright, P., Kroll, M., Tu, H., Helms, and M. 1991. ‘Generic strategies and business performance: An empirical study of the screw machine products industry.’ British Journal of Management 2: 1–9.CrossRefGoogle Scholar
Zajac, E. J. and Kraatz, M. S. 1993. ‘A diametric forces model of strategic change: Assessing the antecedents and consequences of restructuring in the higher education industry.’ Strategic Management Journal 14 (Summer): 83–102.CrossRefGoogle Scholar
Zajac, E. J., Kraatz, M. S., Bresser, and R. F. 2000. ‘Modeling the dynamics of strategic fit: A formative approach to strategic change.’ Strategic Management Journal 21 (4), 429–454.3.0.CO;2-#>CrossRefGoogle Scholar
Zajac, E. J. and Shortell, S. M. 1989. ‘Changing generic strategies: Likelihood, direction, and performance implications.’ Strategic Management Journal 10 (5): 413–430.CrossRefGoogle Scholar