Threat Rigidity Research Articles

Impact of Data Breach on IT Investment: Embracing Both Failure Learning and Threat Rigidity

The extant literature has provided valuable insights into the post-failure behavior of organizations, highlighting two distinct tendencies: failure learning and threat rigidity. While failure learning involves organizations embracing change and seeking improvements after experiencing failures, threat rigidity leads to a more conservative and resistant approach to change during such times. In our study, we used a pioneering approach by integrating these seemingly competing perspectives within the context of data breaches. Employing a propensity score matching (PSM)-combined-difference-in-differences (DiD) approach, we uncovered a dual impact of data breaches on firms’ information technology (IT) investment—after data breaches, firms tend to increase their IT investment intensity (a promoting effect) while simultaneously reducing their new IT investments (an inhibiting effect). Furthermore, we found that a firm with a strong quality culture exhibits a stronger tendency to increase its IT investment intensity following a data breach, while a firm highly valuing innovation demonstrates a weaker trend in reducing new IT investments after a breach. In post hoc analyses, we found that the impact of data breaches on IT investments is contingent on a series of factors related to the nature of the breach and the specific type of IT investments considered. Overall, our study provides valuable insights into the complex and diverse relationship between data breaches and IT investments in firms.

Correction to: Understanding the effects of performance pressure on fluctuations in pro-environmental behavior: a threat rigidity perspective

Correction to: Understanding the effects of performance pressure on fluctuations in pro-environmental behavior: a threat rigidity perspective

Influence of Underperformance Duration on Firms’ Responses to Performance Feedback: Evidence from the Chinese Manufacturing Industry

AbstractThe management literature has extensively explored how firms respond to underperformance through innovation, with prior studies based on the behavioral theory of the firm and the threat-rigidity thesis producing inconsistent results. The shifting focus of attention model provides crucial insights to reconcile this contradiction. We extend this model by highlighting the temporal dimension of performance shortfall. Specifically, we argue that underperformance duration flattens the inverted U-shaped relationship by attenuating both the problemistic search and threat rigidity mechanisms. The empirical results from a sample of Chinese listed manufacturing firms between 2010 and 2019 support our predicted inverted U-relationship between underperformance intensity and research and development (R&D) investment, and the moderating effect of underperformance duration. Interestingly, the inverted U-shape flips to a U-shape if underperformance extends into the long term. We contribute to the literature on performance feedback by considering both underperformance intensity and duration, which conceptualizes their interaction and reconciles extant contradictory findings from a new perspective. We also add new insights into innovation research by theorizing and examining the overlooked boundary condition for the curvilinear relationship between performance shortfalls and R&D investments, which calls for future research to explore the dynamics of the relationship and account for temporal effects.

Understanding the effects of performance pressure on fluctuations in pro-environmental behavior: a threat rigidity perspective

Understanding the effects of performance pressure on fluctuations in pro-environmental behavior: a threat rigidity perspective

SME Strategic Management Practices during the COVID-19 Pandemic in Developing Countries: An Empirical Test of the Threat Rigidity Hypothesis

SME Strategic Management Practices during the COVID-19 Pandemic in Developing Countries: An Empirical Test of the Threat Rigidity Hypothesis

Top management team diversity and adaptive firm performance: the moderating roles of overlapping team tenure and severity of threat

PurposeAlthough strategic scholars have made great effects to exploring the moderating roles of team interaction in explaining the effect of top management team (TMT) diversity, they have adopted seemingly conflicting theoretical perspectives to explain how it works. Drawing on ideas from the threat rigidity theory, the authors integrated these perspectives by proposing a contingency model in which the relationships between TMT diversity and adaptive firm performance depend on the matching between the internal context (i.e. overlapping team tenure) and external context (i.e. severity of threat).Design/methodology/approachThis study sampled 579 Chinese A-share listed companies that have been severely affected by the COVID-19 pandemic, and multilevel linear regression analysis was used to test the hypothesis.FindingsResults provided support for this hypothesis. Specifically, the interaction between TMT age/tenure diversity and overlapping team tenure is significant only when the severity of threat is high, while the interaction between TMT functional diversity and overlapping team tenure is significant only when the severity of threat is low.Originality/valueThe results of this study provide a comprehensive perspective to predict the performance impact of team diversity and contribute to diversity research and practice.

Creativity During Threat to Organizational Survival: The Influence of Employee Creativity on Downsizing Survival Selection

Although research consistently shows that employee creativity contributes to positive outcomes for teams and organizations, we have limited insight into how employee creativity shapes the outcomes of those employees who demonstrate such creativity, particularly in the context of environmental uncertainties. Drawing from event system theory and threat rigidity theory, we argue that under a threat to organizational survival, incremental creativity has a positive, and radical creativity has a negative, indirect effect on downsizing survival selection via manager evaluations of employee job performance. Study 1 uses a unique three-wave, three-source field study ( n1 = 186) to provide support for our hypotheses. Studies 2 and 3 use experimental data ( n2 = 410, n3 = 565) involving different scenarios of threats to organizational survival (i.e., organization's innovation failure, competitor's successful innovation) that provide further support for the hypothesized effects of radical creativity on manager evaluations of employee job performance. Post-hoc analyses reveal novel insights into how managers’ creativity preferences can influence their evaluation of the job performance of employees who demonstrate incremental creativity during threatening events.

Internationalization under attack: the external threat of short sellers

PurposeThe purpose of this paper is to examine the role of short sellers in foreign direct investment (FDI) decisions. Drawing on threat rigidity theory, the authors argue that short sellers pose a threat to chief executive officers (CEOs) by exerting downward pressure to target firms’ stock prices. That threat will evoke rigid managerial responses that hinder new FDI activities. The authors also posit that CEOs will be less reactive to short sellers’ threats when they are generalist CEOs who have extensive general work experience or when they serve as the board chair.Design/methodology/approachThe authors collect data from S&P 1,500 firms, and the final sample consists of 717 firms and 6,930 firm-year observations from 1998 to 2016. The authors use an Arellano and Bond generalized method of moments static linear probability panel data model and an instrumental panel count data model to test the hypotheses.FindingsThe findings support the hypotheses and suggest that CEOs who are under more pressure from short sellers engage in fewer new FDI activities. The negative impact of short sellers on FDI decisions is less salient when CEOs have general work experience or are the chairperson of the board.Originality/valueThis study contributes to the international business research by stressing the need to consider the role of short sellers in firm internationalization decisions.

When the Music Stops: Examining the Timing of Firm Response Following Awareness of Product Defects

Considering the hazard posed by defective products, we know relatively little about how firms determine when to recall products once they are known to have defects. Yet, theoretically, examining this issue opens opportunities to examine strategic aspects of signaling dynamics pertaining to when such negative signals are released to the public. Drawing on two competing perspectives: threat rigidity and stealing the thunder, this study examines the contingencies that determine when firms choose to recall a product following their awareness of a defect. We find that firms are more likely to recall product earlier when the defect is more severe. Moreover, this relationship is moderated by firm age and firm size, showing that older and larger firms tend to announce product recall earlier. Our study demonstrates that stealing the thunder i.e., pre-empting bad news by announcing it quickly, dominates firms’ behaviors in the circumstances of product recall, over alternative theoretical perspectives such as threat rigidity.

Impact of Collective Affect on Employee Voice at Onset of Crisis: A Social Identity Perspective

Employee voice behaviors—the discretionary provision of ideas and suggestions to improve organizational processes—have significant benefits to organizations, particularly in times of crisis. Yet, we know less about how external crises affect employees’ voice behaviors within organizations. In this research, we examine the effect of crisis onset on employee voice behaviors and investigate how and when employees will engage in this important type of behavior during crisis. Integrating insights from social identity theory and research on crises and threat rigidity, we examine how collective positive affect during crisis and perceived opportunity for organizations from the crisis jointly influence employees’ perceptions of self-worth and their voice behaviors during crisis. We test our hypotheses using a seven-wave longitudinal study spanning before and after the onset of the COVID-19 pandemic on 548 working professionals across a wide range of organizations in the UK, and using piecewise latent growth curve modelling. Our findings enable a better understanding of temporal dynamics of voice in organizations, situates employee voice within the broader socio-emotional organizational context during a crisis, and extends social identity theory through the consideration of emotional (in addition to cognitive) cues as guides to employees’ proactive behavior.

The Value of Strategic Loss: When Does Persistent Accounting Loss Lead to Long-term Firm Success?

Persistent accounting loss can be a harbinger of organizational decline, and therefore, strategy scholars seek to identify conditions by which a firm may turn itself around from such trend. However, in the U.S. public equity market, in which loss is prevalent and longer, the market sentiment for persistent loss is quite positive. In this study, we draw insights from the literature on threat rigidity and strategic intent to revisit existing perceptions and conceptualizations about loss and its consequences on a firm’s long-term performance. We theorize about the cost of quick turnarounds caused by the perceptions of threat and about the long-term benefits of persistent loss driven by strategic intent. Using a propensity score matching technique, we find supporting evidence that the long-term performance of firms with strategic intents during a period of persistent loss is better than that of firms that make quick turnarounds. Also, the positive effect of strategic loss is more salient when firms have more intangible assets and when the industry has a more concentrated structure.

The Role of Activist Hedge Funds’ Hostile Tactics on Governance Actions of Target Firms

Hedge fund activism is becoming an integral part of publicly traded firms, and our paper adopts a behavioral lens to examine how specific tactics employed by activist hedge funds may alter the actions of target firms. Our study draws on the theory of threat rigidity to argue that the hostility of activist hedge funds’ tactics may impede the information processing ability of executives and influence their responses. Using a sample of 763 activist hedge fund campaigns from 2002 to 2015, we find that target firms are more likely to engage in a governance action when the activist hedge fund uses more hostile tactics. Further, our findings indicate that the prior activism experience and financial performance of target firms moderate the main effects.

Peer Responses to Environmental Regulatory Sanctions: Local versus Distant Search

Regulators impose sanctions on firms that violate environmental laws or regulations not only to punish the violators but also to warn non-sanctioned firms that environmental misbehaviors may be penalized. Accordingly, non-sanctioned firms are motivated to respond to such sanction threats. Combining problemistic search and threat rigidity theories, we propose that rising environmental regulatory sanctions on industry peers can propel non-sanctioned firms to focus on local search and refrain from distant search, resulting in an increase in environmental lobbying, a direct and immediate strategic action that we consider as an outcome of local search, and a decrease in green innovation, an indirect and long-term strategic action that we consider as an outcome of distant search. We also propose that such effects are stronger when non-sanctioned firms find peer sanctions a more salient threat, reflected by higher media exposure of non-sanctioned firms’ environmental misbehaviors. Using a U.S. sample of 5,893 firm-year observations, we find support for our arguments. This study reconciles problemistic search and threat rigidity theories by highlighting the heterogeneous influence of external threats on local search and distant search and showcases the spillover effect of regulatory sanctions on peer firms.

Two heads are safer than one: Changes in CEO duality and venture failure

We study the dynamics of a major design choice in the governance of ventures: whether to distribute power at the top of the venture between a separate CEO and board chair. We propose that ventures are more likely to combine (separate) their CEO and chair positions when operational performance is poor (strong), demonstrating behavior in line with the threat rigidity thesis. Paradoxically, however, ventures would most benefit from a separate CEO and board chair when operational performance is poor. Empirical analysis of data from the Australian mining industry offers general support for our theory, with some interesting nuances. We discuss the implications of our findings for emerging conversations in the literatures on venture boards, boards of directors, and entrepreneurship.

“This School is Killing my Soul”: Threat Rigidity Responses to High-Stakes Accountability Policies

Accountability-era reforms have promulgated a discourse of crisis and a looming threat for public schools. While these threats negatively affect all, this paper focuses on how schools’ responses to these threats shape novice Teach for America Corp Members’ (CM) socialization. By analyzing nearly 6,000 daily reflections from 38 CMs about their experiences during a high-stakes cheating scandal, we argue that schools’ responses indicated a threat rigidity response that allowed what we call the mesosystem of transgressions to occur. Our implications present ways to (a) mitigate threats inflicted on schools through unjust policies and practices and (b) enact equitable public schools.

Staying small, staying strong? Retail store underexpansion and retailer profitability

Drawing upon the literatures on threat rigidity, the resource-based view of the firm, and investment efficiency, we study the relationship between store underexpansion and retailer profitability. We conceptualize underexpansion as a strategy that can encourage a retailer to operate consistently fewer and smaller stores compared to those expected based on sales. Developing a novel metric that operationalizes this conceptualization and counter to our expectations, we find that underexpansion has a non-negative effect on retailer profitability in the presence of moderators. Specifically, our marginal effect analysis suggests that a better corporate culture, higher selling, general, and administrative (SG&A) capital, and higher intangibility can outweigh the negative direct effect of underexpansion, leading to a positive marginal effect of underexpansion on profitability. These results imply that retailers could benefit from adopting an underexpansion strategy if they have adequate corporate culture, sufficient SG&A capital, or a significant amount of intangible assets.

Perceived Threat of Covid-19, Collectivism and Employee Creativity

The present study investigated the joint effects of cultural collectivism and perceived threat of Covid-19 pandemic on employee anxiety and creativity. Consistent with threat rigidity perspectives on creativity, two studies, including an online experiment (Study 1, N = 183) and a field study (Study 2, N = 293), found that greater perceived threat of Covid-19 was associated with greater self-reported anxiety, which in turn was associated with lower employee creativity. More importantly, we found that cultural collectivism weakened the association between perceived threat of Covid-19 and anxiety. Further, greater perceived threat of Covid-19 was associated with heightened anxiety as well as lower creativity only when cultural collectivism was low; when cultural collectivism was high, perceived threat of Covid-19 was unrelated to anxiety, and ultimately, to creativity. The present findings suggest that cultural collectivism help employees cope with psychological threats. By buffering the anxiety induced by perceived threat of a pandemic, cultural collectivism can help mitigate the negative influence of threat on employee creativity in the midst of crises.

The threat of bankruptcy and financing strategy in learning-intensive industries

PurposeThe authors investigate whether firms in learning-intensive industries are more prone to bankruptcy and how this shapes a firm's financing choices.Design/methodology/approachIndustry learning estimates based on US manufacturing firms are obtained from the study of Balasubramanian and Lieberman (2010; 2011), who collected these estimates from the US Census Bureau. Merging the learning estimates with data from Compustat gives us a final sample of 6,138 publicly-traded US manufacturing firms (56,930 firm-years) between 1973 and 2000. The authors use both OLS and IV estimation approaches to test the hypotheses.FindingsThe findings confirm that firms operating in learning-intensive industries have a higher threat of bankruptcy. The authors also find that a debt-intensive capital structure exacerbates the threat of bankruptcy; therefore, firms in such industries have a significantly lower reliance on debt financing.Practical implicationsIn the current turbulent business environment, managers operating in learning-intensive industries need to be more careful while making financing choices between debt and equity, and they can explore sources of financing that go beyond the capital markets.Originality/valueNo study so far has examined how industry learning intensity, a key industry characteristic, makes firms more prone to bankruptcy, and how this threat of bankruptcy results in more conservative financing choices. By integrating the theoretical perspectives from the structure–conduct–performance (SCP), transaction cost economics (TCE) and threat rigidity paradigms, this paper contributes to the literature by adding the industry learning environment as a novel determinant of firm financing choices and the threat of bankruptcy.

An Examination of Whether and How Prevention Climate Alters the Influence of Turnover on Performance

Recent meta-analytic studies imply that groups often find ways of neutralizing turnover’s harmful effects and that important moderators of the turnover–performance relationship must be missing from the literature. Building on theory and findings related to the threat–rigidity effect, we suggest that groups tend to respond maladaptively to turnover when group norms promote the idea that turnover is threatening. Specifically, we suggest that prevention climate—that is, a climate focused on minimizing mistakes and costs—largely determines the degree to which group norms encourage members to view turnover as threatening and, in turn, the degree to which groups become less adaptive and perform worse in response to turnover. Across a sample of 232 groups, we found evidence that turnover is indeed more negatively related to performance for those groups with a strong prevention climate. Further, in a controlled laboratory context where we manipulated turnover and prevention climate, we found causal evidence supporting our full conceptual model. Our work advances research on turnover by identifying an important moderator and an underlying mechanism of the turnover–performance relationship.

A Daily Investigation of the Effect of Performance Pressure on Pro-Environmental Behavior

Research on workplace pro-environmental behavior is on the raise, but little research has examined the dynamic fluctuations in pro-environmental behaviors. Due to the scarcity of that research, it remains unclear when and under which conditions employees’ pro-environmental behavior will be triggered or constrained from time to time. This research provides insights into the dynamic nature of pro-environmental behavior and its work-relevant predictors. Drawing on threat rigidity theory, we theorize that daily performance pressure, as one of the most salient threatening work experiences, will increase self-concern which correlates with task-related pro-environmental behavior, and will decrease other-concern which correlates with prosocial pro-environmental behavior. Moreover, employees’ functional attitudes towards pro-environmental behavior are predicted to moderate these effects. In an experience sampling study of 114 employees across 10 consecutive workdays, we found that daily performance pressure had a negative effect on prosocial pro-environmental behavior through a decrease in other-concern. Furthermore, this relationship was mitigated by employees’ value-expressive function such that the negative effect was weaker for employees with a high (vs. low) value-expressive function towards pro-environmental behavior. Interestingly, we also found that daily performance pressure had a negative effect on task-related pro-environmental behavior through an increase in self-concern. Theoretical and practical implications of these findings are discussed.