Understanding Business Failure: Learning and Un‐Learning From Industrial Crises

Abstract

Crisis management theory, developed through the study of industrial disasters and socio‐technical failures, is applied to three cases of business failure. The principle objective of the research reported in this paper was to identify whether or not successive failures could have been avoided through organizational learning from similar prior events and what factors might have contributed to or prevented learning. The research also aimed to establish whether or not theoretical frameworks for analyzing and understanding industrial disasters and socio‐technical failures are applicable to business failures.Using detailed case analyses of the failures of Johnson Matthey Bank, the Bank of Credit and Commerce International and Barings, the paper illustrates a series of remarkable similarities in these business failures. It also demonstrates an apparent inability of the management involved in the later failures to learn from what had happened before. Organizational culture is singled out as the main contributing factor in these failures. This paper, in part, proves the case for applying industrial crisis management theory to business failure.