The Joint Effects of Regulatory and Temporal Focus on Firm Survival During Industry Discontinuity

Abstract

Regulatory focus theory has been used in prior research to explain how motivations guide strategic action. This study examines the previously unexamined link between the top management regulatory focus and organizational mortality. We argue and find that the effects of regulatory focus unfold over time as companies addressing a discontinuous change in the industry. Using a sample of 116 private banks from 2009 to 2018, we find that prevention focus reduces mortality at the inception, while promotion focus becomes a more important determinant for firm survival as the change unfolds. In addition, we argue that top management’s temporal focus moderates these effects. We find that future focus strengthens the effects of promotion focus on mortality. Contrary to our expectations, however, past focus does not strengthen, but instead weakens the effect of prevention focus on mortality. Our findings provide novel insights on the interactive effects of regulatory and temporal focus on organizational survival during industry discontinuities.