ABSTRACT
Since Whetten’s (1980a) call for a research program on organizational decline, a considerable body of academic work has accumulated on this topic. Most of this research has focused on the consequences of organizational decline rather than its causes. For example, one stream of literature (e.g., Cullen, Anderson, & Baker, 1986; Ford, 1980; Freeman & Hannan, 1975; McKinley, 1992) has examined the effects of organizational decline on organizational structure. A major issue in this research is whether organizational decline reverses the increase in structural complexity and formalization that typically takes place during organizational growth (Blau, 1970; Cullen et al., 1986). Whereas intuition would lead one to answer ‘yes,’ researchers have identified asymmetries in the magnitude (Freeman & Hannan, 1975; Hannan & Freeman, 1978) and direction (Cullen et al., 1986) of structural change during organizational decline. In the former case, structural complexity and formalization decrease during decline, but at a slower rate than they expand during growth. In the latter case, these structural variables, as well as the size of the administrative component, actually increase during organizational decline. This counterintuitive asymmetry may be due to control needs that arise during decline such as the need to discover new product niches or the need to administer a bureaucratic apparatus to conduct layoffs (McKinley, 1992).
