The recovery response of small industrial firms in corporate turnaround

Nearly all firms experience the problem of performance declines at some point during their existence. Declines threaten jobs, therefore families and communities. Business performance declines, unfortunately, are common, due to a variety of reasons including changing technology, evolving markets, and foreign competition.; Researchers attempting to establish the importance of corporate turnarounds have concluded (a) turnaround situations are growing in frequency and (b) of those firms suffering significant or sustained declining performance, a greater number fail than recover. Severe declines require the implementation of a turnaround strategy to save the business and jobs.; Numerous studies have offered suggestions for turnaround strategies in large firms. Three main recommended strategies are change in CEO, reduced costs, and increased sales. Whether these strategies work for small industrial firms, too, is not well known. Small industrial firms (SIFs) face unique issues in a turnaround situation. They often are handicapped by the lack of robust financial and managerial resources. This research is aimed at helping management better understand the value of large firm turnaround strategies when applied to those size firms.; Small to medium size enterprises and their subset of SIFs occupy a unique place in the U.S. economy. Small to medium enterprises comprise the largest number of total firms, and they employ a large proportion of the workforce. They also develop a large number of new products and services because they can be more nimble and are often closer to their customers than larger firms. This study is an effort to improve the understanding of how SIFs can survive declines.; This study examined 108 North American SIFs to determine if the three strategies identified in research literature as effective for larger firms are also effective with SIFs attempting a successful turnaround. SIFs were defined as companies with fewer than 500 employees and annual sales between {dollar}5 and {dollar}250 million. Findings show that the two strategies of reduced costs and increased sales are effective turnaround strategies for SIFs, with reduced costs being by far the most popular and effective strategy. Additionally, use of all three strategies in combination was a significant predictor of SIF turnaround success.