The impact of performance distress on aggressive competitive behavior: A reconciliation of conflicting views

Prior research on how ex ante performance impacts competitive behavior has led to conflicting conclusions. Prospect theory, for example, suggests that poor performance promotes aggressive behavior, whereas threat–rigidity theory predicts the opposite. We attempt to reconcile these conflicting views by incorporating a contingency perspective that empirically tests, specifically, how top management team heterogeneity and a favorable industry context moderate the relationship between poor performance and competitive aggressiveness. Our findings suggest that performance-distressed firms managed by heterogeneous top management teams are less likely to compete aggressively. However, contrary to predictions, performance-distressed firms competing in competition-buffered industries are more likely to compete aggressively.