Organizational Decline and the Impact of Environmental Challenges of the 21st. Century

g Head: Organizational Decline and 21st Century

Organizational Decline and the Impact of Environmental Challenges of the 21st. Century

SOMNATH LAHIRI

Fogelman College of Business and Economics

The University of Memphis

Memphis, TN 38152

Tel: (901) 678-4834

Fax: (901) 678-3678

slahiri@memphis.edu

ROBERT W. RENN

Fogelman College of Business and Economics

The University of Memphis

Memphis, TN 38152

Tel: (901) 678-2886

Fax: (901) 678-2685

rrenn@memphis.edu

Organizational Decline and 21st Century

Organizational Decline and the Impact of Environmental Challenges of the 21st. Century

Abstract

Studies on organizational decline mushroomed in the 1980s and 1990s. Although decline is a growing phenomenon, there have not been enough studies in the recent past addressing how firms should conceptualize this phenomenon in the competitive landscape that the new century presents. In this paper, we address this gap by developing a framework that links four attributes of the current business environment — globalization, rapid technological change, outsourcing, and hypercompetition — to decline in organizations. After providing an overview of organizational decline, the environmental challenges are explained and propositions are offered. The paper ends with a discussion and conclusion section.

Organizational Decline and 21st Century

Organizational Decline and the Impact of Environmental Challenges of the 21st. Century

Organizational adaptation to the external environment is a central theme in business research (Ashby, 1952; Lewin, Long, & Carroll, 1999). This concept has been studied over the years using various theories and case-studies. The key notion that has emerged from such endeavors is that firms which manage to maintain a fit with the changing environmental conditions survive, grow, and are able to perform well. On the other hand, organizations that cannot match up to the external challenges fail to grow, gradually decline and may ultimately cease to exist. Though