Attention to organizational failure: Explaining organizational failure using managerial attention

Abstract

Research on organizational failure is scarce and scattered across different fields. Using the Attentional Perspective (Ocasio, 2011), we examine quantitatively how the distribution of managerial attention affects the likelihood of organizational failure. This perspective allows for the integration of different approaches to organizational failure, viewing the Top-Management Team (TMT) as having agency, albeit affected by the environment’s constraints. The distribution of managerial attention is the focal construct, which determines what pieces of information get noticed, encoded, and used in strategic decision-making by the TMT. Using Data Envelopment Analysis on data from commercial banks in the U.S. during the 2008 economic crisis, we estimate the distribution of managerial attention. Using mixed-effects survival models, we found that the management of banks whom focus their attention more on bank stability are more likely to survive. Our work shows how the Attentional Perspective is helpful in explaining of organizational failure, being able to bridge different perspectives, and how novel methodologies could overcome data limitations.