Adaptation of allocation of resources and attention in response to external shocks

Abstract

PurposeThe basic assumption in strategic management is that consistently high performing companies are able to adapt effectively to external shocks. While adaptation of allocation of resources and its constraints have been investigated, it is important to also consider the allocation of attention. Therefore, this study seeks to examine the differences in the patterns in the allocation of resources and attention in a comparative case study with focus on Southwest Airlines. This study illustrates that the comparison of the patterns of allocation of resource and attention is very promising for the explanation of consistent superior performance.Design/methodology/approachThis paper analyzes Federal Aviation Administration and American Transport Association data in order to determine actual resource allocation. Moreover, textual analysis of annual reports serves as basis for examining the patterns of allocation of attention.FindingsThe results of this paper reveal a striking divergence of allocation of resources and attention (particularly attention to differentiation) for Southwest Airlines – the consistently high performing firm in the US airline industry.Research limitations/implicationsThe major limitation of the current study is the fact that it is a single industry study. It would be very interesting to replicate this study in other industries.Practical implicationsThis study shows the importance of allocation of attention for firm performance. This is particularly relevant for resource intensive industries such as the airline industry where organizational inertia makes it hard to move resources fast. Yet, attention appears to have a great potential for firm performance and can be changed more easily.Originality/valueDespite great interest in allocation of resources and attention in strategy research, authors rarely combine these two perspectives. Nadkarni and Barr present a notable exception. Yet, the latter authors focus on one specific aspect of adaptation of strategic actions, i.e. the timeliness of response. The present study takes a more comprehensive view of adaptation, e.g. the respective changes in slopes of adaptation.