What constrains or facilitates divestitures of formerly acquired firms? The effects of organizational inertia

Katsuhiko Shimizu, Michael A. Hitt

Research output: Contribution to journalArticle

100 Citations (Scopus)

Abstract

This study examined behavioral explanations for the divestitures of formerly acquired units, particularly organizational inertia. It was argued that characteristics of parent firms and divested units reduce the likelihood of divesting a poorly performing unit. Conversely, it was also argued that change of key personnel and effective governance mechanisms increase the likelihood of such divestitures. Importantly, the results show that with age and size combined, appointment of new outside directors and divestiture experience (among other variables) moderated the effects on the likelihood of firms divesting units they had previously acquired. Implications for future theory development and management practice are also discussed.

Original languageEnglish
Pages (from-to)50-72
Number of pages23
JournalJournal of Management
Volume31
Issue number1
DOIs
Publication statusPublished - 2005 Feb 1
Externally publishedYes

Keywords

  • Case control design
  • Divestiture
  • Mergers and acquisitions
  • Organizational inertia

ASJC Scopus subject areas

  • Finance
  • Strategy and Management

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