Business exit and strategic change: Sticking to the knitting or striking a new strategic path?

Decker, Carolin and Mellewigt, Thomas (2012). Business exit and strategic change: Sticking to the knitting or striking a new strategic path? British Journal of Management, 23 pp. 165–178.

DOI: https://doi.org/10.1111/j.1467-8551.2010.00706.x

Abstract

The purpose of this study is to examine the potential of business exit for initiating strategic change in divesting parent firms. In contrast to prior literature that mainly investigates the impact of different antecedents on the likelihood of business exit in general, this study additionally tests the influence of these antecedents on the choice between two exit types with a cross-industry sample of divesting firms listed in the German CDAX over the time period 1999-2004. A divestiture involving strategic change is a strategic business exit; otherwise it is denoted as status quo-preserving. The findings reveal that a relatively highly dissipated focus does not automatically enhance the likelihood of business exit in general and status quo-preserving business exit in particular. CEO turnover and pressures exerted by institutional investors predict neither strategic nor status quo-preserving business exit. Low firm performance does not nurture the likelihood of business exit per se but especially promotes status quo-preserving business exit.

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