Managing and Coping with Organizational Failure: Introduction to the Special Issue

Abstract

Introduction This special issue focuses on understanding the causes and management of organizational failure. Over the years far more organizations have failed than have succeeded. Yet, within business and management research, the study of organizational failure has always been considered as secondary to organizational success. Failure is commonly seen as being of less significance or, at best, as being complementary to research on organizational success. “Failure is the most fundamental feature of both biological systems and human social and economic organisations,” as Ormerod (2005 p14 ) notes. “Of all the species that have ever existed, 99.99 per cent have failed in the most dramatic way. They are extinct. In America, more than 10 per cent of all companies fail every year, with more than 10,000 closing every week. Yet the existence of failure is one of the great unmentionables” (Ormerod, 2005: page 14). However, recently scholars from different disciplines including business history (Fridenson, 2005), economics (Ormerod, 2005), business management (Finkelstein, 2003; Wilkinson & Mellahi, 2005), strategic management (Mellahi & Sminia, 2009), and political science and law (Balleisen, 2001) have been calling for more research on business and organizational failure. This surge in interest in organizational failure is due in part to the wash up of the global financial crisis. High profile corporate failures caused by accounting frauds and deceits (e.g., Enron, Parmalat and WirldCom), fatal accidents (e.g., BP’s Texas City refinery fire), environmental disasters (e.g., BP’s oil leak in the Gulf of Mexico) and high levels corporate meltdowns as a result of the current global economic crisis (e.g., Northern Rock, AIG, and Freddie Mac) (Gillespie & Dietz, 2009: 127) have thrown failure into sharp relief.