Resource Redeployment and Divestiture as Strategic Alternatives
This study investigates the factors that lead managers to choose resource redeployment over divestiture as a mode of exit, and vice versa. Using a formal model, we establish that time, the relative and absolute performance of a firm’s businesses, and implementation costs all shape the choice between redeployment and divestiture. We also derive a series of results that show that disregarding one of these two exit options as a strategic alternative to the other may lead to misspecifications of empirical models that seek to predict the likelihood of redeployment, divestiture, or exit overall. Our work contributes to the corporate strategy literature by uniting two streams of research that have largely remained disparate, yet whose insights have significant implications for the other body of work.