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Abstract: The deregulation of the U.S. air transportation industry in 1978 has served both as an inspiration for subsequent deregulation efforts and as a natural experiment of firm behavior under significant environmental change. The deregulation hurled many airlines into a qualitatively different business context in which they needed to re-establish their competitive positions. Our research aims to identify airlines' characteristics connected with success or its absence in the early post-deregulation era. For this purpose, we use Qualitative Comparative Analysis (QCA) that allows us to observe airlines' characteristics in their combinations, not as independent factors. The method enables us to point out the equifinality in airlines' success, meaning that there were several ways how airlines could have become successful. We find that there were no clear pathways towards post-deregulation success. Yet, the results suggest (with borderline significance) that large airlines that changed their strategy succeeded. Regarding the absence of success, we find three combinations of conditions that explain the lack of success with a relatively high significance. Both results for the presence of success and its absence provides some support for the Icarus paradox. In this phenomenon, a satisfactory past performance causes a strategic persistence that is rendered dysfunctional during and after the breakthrough event and causes airlines' decline.
Keywords: success, deregulation, breakthrough event, Icarus paradox, strategic persistence, qualitative comparative analysis
1. Introduction
The deregulation of the U.S. air transportation industry in 1978 was a breakthrough event that now serves as a natural experiment of firms' behavior and decision-making during the turmoil in the industry. It led to a decrease in flying fares, made flying available to masses, and gave rise to flying as we know it today - as a primary means of transportation over long distances. The deregulation, however, disrupted the industry and changed its status quo. It lowered the barriers of entry in the industry and thus increased the competition. Thus, the change of strategy and business models was necessary for many airlines. Simultaneously, it caused financial troubles to some airlines, brought about increased employee fluctuation, and heated labor relations.
We aim to identify airlines' characteristics related to success or its absence in the early post-deregulation era (until 1983). We employ Qualitative Comparative Analysis (QCA) - a method that stands as an...