Threat Rigidity - Theory testing, construct expansion and antecedents

Abstract

Among the several theories related to organizational decline, the Threat Rigidity thesis is one of the most cited. This is because it provides a simple but adequate explanation for many real instances of organizational failure. In accordance with this theory, threats will lead organizations to enter a stress-induced phase, which, in turn, makes them rigid. This rigidity has negative outcomes for an organization, such as leading to a restricted flow of information and increased control concentrated in the top management. Although being one of the most cited theories in strategy, its testing and empirical confirmation has been attempted only in a very short list of papers and the overall result has been mixed (Plotnick & Turoff, 2010). To verify the theory, I propose a reorganization in the internal constructs in Threat Rigidity and test whether it affects another organizational-level construct (Market Orientation), through a partial-least squares structural equation model. The results obtained demonstrate that the internal reorganization holds true, and that Threat Rigidity affects organizational Market Orientation. I further verify two antecedents to Threat Rigidity (Crisis Response and Organizational Reputation) and the results show that both directly affect Threat Rigidity. Both Organizational Reputation and Threat Rigidity (as tested before) affect Market orientation, but Crisis Response only indirectly affects it, through mediation of Threat Rigidity. The overall results assist in redressing the Threat Rigidity concept, offer insights on the internal components of the theory, and opens horizons for future research on antecedents and consequences of Threat Rigidity.