Strategic Resource Reallocation: Exploring the Interplay B etween Divestitures , Board Member Turnover, and Firm Performance from a RBV Perspective

Abstract

Building upon the assumptions of the Resource Based View Theory, this research explores the impact of divestitures on board member turnover , with firm performance as mediating variable. This research applies the Baron & Kenny method to assess mediation . The sample researched contains a 2 5 year time period, including 4775 annual observations of 3 05 publicly listed high tech firms . The research argues that divestitures represent a strategic refocus, enabling firms to reallocate resources towards their core and more profitable businesses. The st udy also argues that firm performance directly affects board member turnover, with a lower performance increasing board member turnover. Lastly, we argue that firm performance mediates the relationship between divestitures and board member turnover. The findings indicate that divestitures lead to improved firm performance and that there is a weak but negative relationship between firm performance on board member turnover. Also, while engagement in divestitures negatively impacts board member turnover, a higher frequency of divestitures reinforces it. Firm performance is found to play a partial mediating role in this relationship between divestitures and board me mber turnover. This study makes academic contribu ti ons to the existing literature on board member turnover, RBV and divestiture s. The practical contributions regards managers and firms to consider divestitures as a way of strategic refocus , leading to an increase in their performance and stability in their boards.