The impact of modes of entry and resource fit on modes of exit by multibusiness firms

This study examines the choices of modes of entry and exit in the process of new business exploration. We find that exit mode choices are determined by a different set of factors from those that are important for the entry mode decision and the exit decision per se. Our study indicates that when the resource profiles of a parent firm and the business unit are more dissimilar, and there has been less development of firm‐specific idiosyncratic assets, firms are more likely to sell businesses than dissolve them. Further, the study reports a strong relationship between the mode of exit from a line of business (sell‐off vs. dissolution) and the original mode of entry (acquisition versus internal development). Copyright © 1999 John Wiley & Sons, Ltd.

[1]  Donald E. Hatfield,et al.  THE EFFECTS OF CORPORATE RESTRUCTURING ON AGGREGATE INDUSTRY SPECIALIZATION , 1996 .

[2]  B. Wernerfelt,et al.  A Resource-Based View of the Firm , 1984 .

[3]  Will Mitchell,et al.  The Dynamics of Evolving Markets: The Effects of Business Sales and Age on Dissolutions and Divestitures , 1994 .

[4]  Sayan Chatterjee,et al.  Excess Resources, Utilization Costs, And Mode Of Entry , 1990 .

[5]  O. Williamson,et al.  Markets and Hierarchies: Analysis and Antitrust Implications. , 1977 .

[6]  Anurag Sharma,et al.  Diversifying Entry: Some Ex Ante Explanations for Postentry Survival and Growth , 1996 .

[7]  P. Allison.  Event History Analysis , 1984 .

[8]  D. McFadden.  Conditional logit analysis of qualitative choice behavior , 1972 .

[9]  Birger Wernerfelt,et al.  The link between resources and type of diversification: Theory and evidence , 1991 .

[10]  George S. Yip.  Diversification entry: Internal development versus acquisition , 1982 .

[11]  Charles F. Manski,et al.  Alternative Estimators and Sample Designs for Discrete Choice Analysis , 1981 .

[12]  P. Geroski.  What do we know about entry , 1995 .

[13]  Hiroyuki Itami.  Mobilizing invisible assets , 1987 .

[14]  W. P. Barnett,et al.  The Organizational Ecology of a Technological System. , 1990 .

[15]  Douglas D. Moesel,et al.  Corporate Divestiture Intensity in Restructuring Firms: Effects of Governance, Strategy, and Performance , 1994 .

[16]  Moshe Farjoun.  Beyond Industry Boundaries: Human Expertise, Diversification and Resource-Related Industry Groups , 1994 .

[17]  Thomas H. Brush.  PREDICTED CHANGE IN OPERATIONAL SYNERGY AND POST‐ACQUISITION PERFORMANCE OF ACQUIRED BUSINESSES , 1996 .

[18]  G. Carroll,et al.  The Liability of Newness: Age Dependence in Organizational Death Rates , 1983 .

[19]  J. D. Graaff,et al.  Theoretical welfare economics , 1957 .

[20]  E. Penrose.  The theory of the growth of the firm twenty-five years after , 1960 .

[21]  J. Barney.  Strategic Factor Markets: Expectations, Luck, and Business Strategy , 1986 .

[22]  M. Porter.  From Competitive Advantage to Corporate Strategy , 1989 .

[23]  Glenn R. Carroll,et al.  The Organizational Ecology of Strategic Groups in the American Brewing Industry from 1975 to 1990 , 1992 .

[24]  Paul A. Samuelson,et al.  Theoretical welfare economics , 1957 .

[25]  John H. Grant,et al.  FACTORS INFLUENCING DIVESTMENT DECISION-MAKING: EVIDENCE FROM A FIELD STUDY , 1982 .

[26]  Paul H. Rubin.  The Expansion of Firms , 1973, Journal of Political Economy.

[27]  G. Maddala.  Limited-dependent and qualitative variables in econometrics: Introduction , 1983 .

[28]  Sea Jin Chang,et al.  AN EVOLUTIONARY PERSPECTIVE ON DIVERSIFICATION AND CORPORATE RESTRUCTURING: ENTRY, EXIT, AND ECONOMIC PERFORMANCE DURING 1981–89 , 1996 .

[29]  Cynthia A. Montgomery,et al.  Diversified expansion by large established firms , 1991 .

[30]  S. Winter,et al.  An evolutionary theory of economic change , 1983 .

[31]  Aubrey Silberston,et al.  Diversification and Integration in American Industry. , 1962 .

[32]  F. Scherer,et al.  Divisional sell‐off: A hazard function analysis , 1991 .

[33]  David S. Evans.  The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries. , 1987 .

[34]  Joel A. C. Baum,et al.  Localized Competition and Organizational Failure in the Manhattan Hotel Industry, 1898-1990 , 1992 .

[35]  A. Stinchcombe.  Social Structure and Organizations , 2000, Political Organizations.

[36]  P. Schmidt,et al.  Limited-Dependent and Qualitative Variables in Econometrics. , 1984 .

[37]  James J. Chrisman,et al.  Corporate diversification: Entry, strategy, and performance , 1984 .