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

Katsuhiko Shimizu, Michael A. Hitt

Research output: Contribution to journalArticle

90 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
Externally publishedYes

Fingerprint

Organizational inertia
Divestitures
Outside directors
Personnel
Management practices
Divestiture
Governance mechanisms
Theory development

Keywords

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

ASJC Scopus subject areas

  • Strategy and Management
  • Finance

Cite this

What constrains or facilitates divestitures of formerly acquired firms? The effects of organizational inertia. / Shimizu, Katsuhiko; Hitt, Michael A.

In: Journal of Management, Vol. 31, No. 1, 02.2005, p. 50-72.

Research output: Contribution to journalArticle

@article{68bfdc35050341d3a2d895e27e129fff,
title = "What constrains or facilitates divestitures of formerly acquired firms? The effects of organizational inertia",
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.",
keywords = "Case control design, Divestiture, Mergers and acquisitions, Organizational inertia",
author = "Katsuhiko Shimizu and Hitt, {Michael A.}",
year = "2005",
month = "2",
doi = "10.1177/0149206304271381",
language = "English",
volume = "31",
pages = "50--72",
journal = "Journal of Management",
issn = "0149-2063",
publisher = "SAGE Publications Inc.",
number = "1",

}

TY - JOUR

T1 - What constrains or facilitates divestitures of formerly acquired firms? The effects of organizational inertia

AU - Shimizu, Katsuhiko

AU - Hitt, Michael A.

PY - 2005/2

Y1 - 2005/2

N2 - 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.

AB - 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.

KW - Case control design

KW - Divestiture

KW - Mergers and acquisitions

KW - Organizational inertia

UR - http://www.scopus.com/inward/record.url?scp=23244466270&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=23244466270&partnerID=8YFLogxK

U2 - 10.1177/0149206304271381

DO - 10.1177/0149206304271381

M3 - Article

AN - SCOPUS:23244466270

VL - 31

SP - 50

EP - 72

JO - Journal of Management

JF - Journal of Management

SN - 0149-2063

IS - 1

ER -