Environmental Jolts, Clocks, and Strategic Change in the U.S. Airline Industry: The Effects of Deregulation and the 9/11/2001 Terrorist Attacks

Irene Goll and Abdul A. Rasheed

Business and Politics, 2011, vol. 13, issue 4, 1-35

Abstract: This study examines the effects of two major environmental jolts, the Airline Deregulation Act of 1978 and the 9/11/2001 terrorist attacks, on strategic change and performance in the U.S. air carrier industry. The sample includes the Major U.S. air carriers during two periods of time: deregulation (1974-1986) and 9/11/2001 (1997-2008). Data were collected from archival sources and analyzed using cross-sectional time series regressions with fixed effects. The results show that following both environmental jolts, the initial response of the airlines was emphasis on cost control. However, over the long run, there was a deceleration of the emphasis on cost control. Further, following deregulation, the long run response involved the acceleration of differentiation change. We also found a significant relationship between strategic change and firm performance. The results contribute towards a reconciliation of the conflicting predictions of the repetitive momentum hypothesis and the deceleration hypothesis.

Date: 2011
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