International Journal of Business and Administrative Studies volume 7 issue 4 pp. 54-67 doi: https://dx.doi.org/10.20469/ijbas.7.10001-4 Effects of Rapid Environmental Change and Speed of Decline on Distressed Firms and Turnaround Outcomes John D. Francis Fowler College of Business, San Diego State University, San Diego, CA Ashay B. Desai * College of Business Administration, The University of Wisconsin Oshkosh, Oshkosh, WI Tim Pett Department of Business, Rollins College, Winter Park, FL Abstract: This paper examines the effects of two specific contextual factors: environmental velocity and decline speed, and timing of response on a firm’s turnaround performance. We conducted a 12-year longitudinal study on a sample of U.S.-based, publicly traded firms that experienced a significant decline in performance. We find that environmental velocity impacts the swiftness and nature of the response to performance decline, and that, in turn, affects turnaround outcomes. Firms in high-velocity environments undergo rapid declines and are more likely to undertake a retrenchment strategy. Speed in implementing a retrenchment strategy is linked to turnaround for firms experiencing rapid declines. These results further our knowledge of the nature of the multifaceted association between the nature of change in the environment, managerial action, and performance outcomes. One of the few longitudinal studies to include both industry- and firm-level variables in advancing interpretations of strategic turnarounds. Keywords: Rapid change, business turnarounds, retrenchment, longitudinal Received: 03 April 2021; Accepted: 18 July 2021; Published: 13 August 2021 INTRODUCTION Deconstructing various elements of organizational distress remains an important goal for management researchers and practitioners as firms must continue to adjust to the complex realities of today’s business environment. Ongoing research continues to raise questions regarding the turnaround process and the necessary steps to take to improve performance (Barbero, Di Pietro, & Chiang, 2017; Schweizer & Nienhaus, 2017; Trahms, Ndofor, & Sirmon, 2013; Wang & Bai, 2021). Corporate turnarounds entail complex processes and comprise series of responses to environmental exigencies. In order to understand the effect of turnaround strategies, one must understand the environmental charac- teristics and nature, speed, and timing of those responses (Barbero et al., 2017; Barbero, Martínez, & Moreno, 2020; Schmitt, Raisch, & Volberda, 2018). Environmental velocity, or rate of change, has become of increasing importance to strategists and researchers as escalating turbulence of the environment is deemed to impact organizations (McCarthy, Ian P and Lawrence, Thomas B and Wixted, Brian and Gordon, Brian R, 2010; Schmitt, Barker III, Raisch, & Whetten, 2016). Researchers have investigated velocity in the decision-making of top management teams (Eisenhardt & Bourgeois III, 1988), or how rapid * Correspondence concerning this article should be addressed to Ashay B. Desai, College of Business Administration, The University of Wisconsin Oshkosh, Oshkosh, WI. E-mail: desai@uwosh.edu c  2021 The Author(s). Published by KKG Publications. This is an Open Access article distributed under a Creative Commons Attribution- NonCommercial-NoDerivatives 4.0 International License.