Untying the Knot: How Divestment Experience Impacts Firm Performance, exploring the Moderating Role of Financial Slack and reconfiguration capability

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2023-07-03
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en
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While divestitures constitute a big part of global business transactions, they receive less attention in management studies compared to M&As. This study examined the impact of divestiture experience on firm performance while taking into account the moderating roles of financial slack and reconfiguration capability. Using theory on dynamic capabilities, I hypothesized that firms that have a reconfiguration capability in place experience increased firm performance when divesting more often compared to firms that do not have the reconfiguration capability in place. Additionally, it was suggested that financial slack negatively moderates the relationship between divestiture experience and firm performance. I tested my hypotheses using a panel of 15.025 divestitures in the high-tech industry from the SDC Mergers & Acquisitions dataset from the time period between January 2000 and December 2020. I found support for the hypotheses, which means that I found support for the causal relations between these variables. This study contributes to the divestiture literature by finding that knowledge is helpful in correctly pulling off divestitures. Additionally, this study also contributes to dynamic capability literature by finding that divestitures are a source for reconfiguration capabilities, by showing the differentiation between experience and learning, and by identifying financial slack as negatively moderating the relationship between divestiture experience and firm performance.
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Faculteit der Managementwetenschappen
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