Regulatory reform and managerial choice: an analysis of the cost savings from airline deregulation

Margaret Peteraf and Randal Reed
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Margaret Peteraf: Tuck School of Business at Dartmouth, Hanover, NH, USA, Postal: Tuck School of Business at Dartmouth, Hanover, NH, USA
Randal Reed: Morgan State University, Baltimore, MA, USA, Postal: Morgan State University, Baltimore, MA, USA

Managerial and Decision Economics, 2008, vol. 29, issue 2-3, pages 99-116

Abstract: This paper explores the question of how the differential exercise of managerial choice can facilitate organizational adaptation and improve efficiency over periods of regulatory change. We address this question in the context of the US airline industry, with a detailed decomposition of an airline cost function. Our findings suggest that managers employ choice in unconstrained domains to counteract the effects of constrained or pre-determined choices. This is an adaptive mechanism that helps firms adjust to environmental change or maneuver over a rugged landscape. We view this as a type of dynamic managerial capability for achieving dynamic fit under changing conditions. Copyright © 2008 John Wiley & Sons, Ltd.

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