A Dual View on IT Challenges in Corporate Divestments and Acquisitions

Acquisitions of new businesses and divestments of existing ones are frequently components of large organizations’ corporate strategies. In both acquisitions and divestments, corporate IT infrastructure plays a critical role for realizing business objectives. In this paper, we take a dual view of the IT-related challenges in divestment and acquisition strategies, studying them as a single integrated transaction between a buyer and a seller and investigating how the IT carve-out and IT integration strategies influence each other. The extant literature on the interaction between carve-outs and integration strategies is an empty set. Here, we begin to shed light to the limitations of the carve-out contract, the processes of carving out a business unit from one and integrating it into another multi-business organization, asymmetries in both parties’ preferences for an IT transaction process and its influence on arising challenges and organization performance

IT-Driven Divestments: Towards Theoretical Multiplicity Through A Configurational Approach

The ongoing digitization, IT advancements, and innovative business models disrupt many industries. They pressure established organizations to adjust their organizational structures and procedures within their own business. So far, IT-driven divestments have received less attention in IS research. Following the configurational approach to two theoretical perspectives – (1) the resource-based view and (2) the concept of ambidexterity – we derive two causal configurations to ground IT-driven divestments theoretically. Thereby, we contribute to theory by illustrating the suitability of a configurational approach to investigate the theoretical multiplicity of IT-driven divestments. We discuss our insights against the theory of path dependence. We conclude by outlining our contribution to theory and practice and suggesting steps for future research

Three decades of subsidiary exits: Parent firm financial performance and moderators

This study aimed to find important constructs and relationships among models of subsidiary divestment during the period from 1989 to 2018 using correlation matrices of 80 studies, the selection of which was based on six criteria. It revealed eight important constructs, namely firm innovativeness, environmental factors in the target country, type of experience, organizational characteristics, investment strategy, parent firm financial performance, subsidiary divestment, and the moderating effects of advertising intensity and product diversification. Furthermore, it shed light on seven relationships that should be considered in future attempts to assess parent performance related to its antecedents and subsidiary divestment. Moreover, advertising intensity and product diversification were respectively weakening and strengthening moderators on firm financial performance, and advertising intensity was a weakening moderator between organizational characteristics and subsidiary divestment. The implementation of a product diversification policy did not assist in preventing subsidiary divestment. Conclusions, implications, limitations, and future research are discussed

Foreign Divestment in E-business: Analysis of foreign market exit of Groupon and Lyyti

E-business is expanding dramatically as more companies are using the Internet to conduct business online. The Internet enables companies to internationalize rapidly and to expand to new markets outside of their home country. However, in recent years a new trend has become evident in the e-business industry: an increasing number of e-business companies is divesting operations from their foreign markets. This research examines the factors that lead to foreign divestment in e-business. The research question is divided into four sub-questions, i.e. what is the role of (1) environmental stability, (2) attractiveness of current operations, (3) strategic fit, and (4) governance issues on foreign divestment in e-business. The chosen research method was a qualitative case study. Lyyti and Groupon were selected as case examples through criterion-based sampling. Both are e-business companies that have divested operations from a foreign market. The empirical data was collected through three semi-structured interviews with key participants in the cases. In addition, in Groupon’s case public data and statements were used to complement the information from the interview. The interview themes derived directly from the theoretical framework of Benito created in 1997. The findings of this research support the validity of Benito’s divestment model in both cases. The strongest factor contributing to the decision to divest foreign operations was found to be ‘Attractiveness of current operations’. In both cases the current operations were not perceived as viable enough to continue. In Lyyti’s case the foreign operations were not financially profitable, whereas in Groupon’s case it was the poor performance of the parent company that led to a reallocation of resources in more promising markets. In addition, strategic considerations and governance issues were found to have an impact on the decision to divest. Environmental stability, however, was only a minor factor explaining foreign divestment decisions. The findings of this research have proved that even within the same industry the factors contributing to foreign divestment are not always the same. Even though there was evidence found for all factors of Benito’s divestment model, the importance of the given factors was found to vary greatly. Based on the findings of this research, four managerial implications can be drawn: (1) the company’s overall performance can be improved by reallocating resources to markets with better potential; (2) if a strategy appears to be bad, it should be changed already at an early stage; (3) a careful pre-investment analysis can help to avoid foreign divestments later on; and (4) a good contact in a foreign country can be the key to successsiirretty Doriast

Strategy-as-Coping in Medium-Sized Enterprises: A Social Process of Collective Sensing for Acquisition Opportunities

We explore what may be learned from managerial practices of an established medium-sized enterprise (“MSE”) in surviving and thriving during a recession. Drawing on a Strategy-as- Practice (“SAP”) view of managerial action, an improvised strategic process was observed in four acquisitions undertaken by the MSE when its closely-knit management reacted to operational pressure by improvising ideas for potential acquisitions. This process, which we call “collective sensing”, occurred within unscheduled “get-togethers” in the workplace, when participants enacted a range of roles in a routine of sensing potential acquisitions. We explain collective sensing by viewing it as a consistent pattern of actions among top managers who used get-togethers as a creative platform for identifying a stream of potential acquisitions, including potentially valuable opportunities that have been overlooked in the market. Several contributions are proposed for developing and using collective sensing in SMEs as a practical managerial process that can produce high-potential acquisitions

Shaping the corporate perimeter in a changing media industry

A constant theme in strategic media management literature is the transformational impact that digital media technologies and deregulation have had on shaping media firms’ corporate strategies. Whilst the role of corporate strategy is to encapsulate a firm’s long-term direction and scope of activities, it will also give a strong indication of how the firm will compete and be positioned in an industry. However, the transformative effects of a highly technological media environment have changed our traditional view of how the media industry is defined, and so developing a strategic recipe for competing in an ill-defined industry becomes more challenging. This paper examines a single media firm’s corporate strategy and perimeter and considers this in the context of a changing media industry. The paper takes a practice-led approach by undertaking a longitudinal analysis of a firm’s acquisition and divestment activities in order to understand its corporate perimeter and by implication the industry or industries where it competes. We argue that by exploring a media firm’s corporate strategy and perimeter over time, scholars will not only be able to better understand the dynamics of media practice and strategy, but also gain an insight into the changing nature of the media industry. The paper concludes that Porter’s (1980) seminal work on industry structure, profitability and attractiveness remains a relevant form of strategic analysis that can help media management researchers to conceptualize and understand the evolution of media firm corporate perimeter and the industries in which they compete

Real Options in Sequential Stock Acquisitions

My dissertation seeks to address ambiguities in the common usage of real options as the counterpart of financial options in management, focusing on a specific management context: sequential acquisitions of equity stock. Despite its popularity, the metaphoric use of real options on sequential acquisitions brings up critical ambiguities, which might not be congruent with assumptions in the finance options literature. I seek to examine such ambiguities and align them with the theory and practice of strategic management. The dissertation is structured as follows: In Essay 1, I first identify key ambiguities in the metaphoric use of real options as a reflection of finance options in several management contexts, and then focus on addressing two key ambiguities in equity partnerships. Further, I provide the baseline framework to address the ambiguities, leading to the view of "dual latent options - dual partner roles." Finally, I propose three future research questions worth examining. In Essay 2, I address one of the three questions suggested in Essay 1: what conditions enable a particular equity partner in an international equity partnership, to exercise its call by acquisition (exercise its put option by divestment) upon favorable (unfavorable) market shock? Suggesting that the organizational capability to perceive external environments serves as an important contingency, I argue that the partner who can more significantly reduce its perceptual uncertainty will exercise an option aligned with the direction of the market shock. By extending this logic to international equity partnerships, I hypothesize about how a foreign partner's equity purchase (which coincides with local partner's equity divestment) is influenced by environment shocks. I conduct a regression analysis with a longitudinal dataset of international equity partnerships in the automotive component industry, and obtain results supportive of the hypotheses. In conclusion, my dissertation contributes to nudging the real options view from its current form, which is the largely metaphoric use of finance options, toward a "management theory" that is more consistent with the realities of strategic management

Conglomeration: an investigation into the incidence and significance amongst FTSE100 companies since 1993

This research created a database of financial and non-financial information extracted from DataStream, annual reports and accounts, company websites and other reputable sources to investigate the incidence of conglomeration amongst the largest, by market capitalisation, companies, both industrial/manufacturing and service, that comprised the London Stock Exchange FTSE100 index at the end of 1993, 1998 and 2003. Categorising companies according to the 4-category Rumelt-based scheme used in previous UK research by Channon (1973, 1978) and Whittington & Mayer (2000), this research has found support for the contention, based on anecdotal evidence, that conglomeration amongst the FTSE100 has declined, especially between 1998 and 2003. Rather than confirming the evolutionary flow of companies through the Model of Corporate Development from single business to conglomerate strategies, the research shows more companies to have retreated to greater focus than advanced to wider diversification. Furthermore, the breadth of activities pursued by conglomerates fell through the research period and there was also an increase in diversified companies with a core activity generating more than 50% of their turnover. Whilst acknowledging that several conglomerates were created by strong business personalities including Lords Hanson and White at Hanson and Sir Owen Green at BTR, no strong relationships were found between corporate governance and diversification. The enhancement of corporate governance Best Practice resulted in improvements across all companies. Finally, this research suggests performance is not a primary driver of the trend towards focus but that financial/market and regulatory, especially competition authority, factors led to changes in diversification through a mixture of divestment, demerger, capital reduction/downsizing, acquisitions and internationalisation. The Model of Corporate Development has become multi-directional with movements influenced by generic, industry specific and company specific factors. There is also an inherent trade-off across diversification categories in the potential level of risk, growth, scale and scope benefits

Concurrent learning : how firms develop multiple dynamic capabilities in parallel

Much is known about the importance of dynamic capabilities. Yet, surprisingly little is known about how multiple dynamic capabilities might be developed in parallel, since most existing work explores a particular dynamic capability in isolation. Using rich quantitative and qualitative data on Dow Chemical's acquisitions, joint ventures, and divestitures over the past 20 years, we seek to address this gap. Besides contributing by adding fresh insights about managing growth and the utility of distributed practice, and by shedding light on positive and negative experience transfer, our core contribution is an emergent theoretical framework that develops the concept of “concurrent learning. ” Copyright © 2014 John Wiley & Sons, Ltd