ENTRY, EXIT, AND THE POTENTIAL FOR RESOURCE REDEPLOYMENT

• 成果类型: Article
• 署名作者: Lieberman, Marvin B.; Lee, Gwendolyn K.; Folta, Timothy B.
• 署名单位: University of California System; University of California Los Angeles; State University System of Florida; University of Florida; University of Connecticut; Universites de Strasbourg Etablissements Associes; Universite de Strasbourg
• 刊物名称: STRATEGIC MANAGEMENT JOURNAL
• ISSN/ISSBN: 0143-2095
• DOI: 10.1002/smj.2501
• 发表日期: 2017
• 页码: 526-544
• 关键词: resource redeployment; market entry/exit; diversification; corporate strategy

摘要

Research summary: Combining the concept of resource relatedness with the economic notion of sunk costs, we assess how the potential for resource redeployment affects market entry and exit by multi-business firms. If the performance of a new business falls below expectations, a diversified firm may be able to redeploy its resources back into related businesses. In effect, relatedness reduces the sunk costs associated with a new business, which facilitates exit. This, in turn, has implications for entry: By decreasing the cost of failure, the potential for redeployment justifies the undertaking of riskier entries and greater experimentation. These dynamic benefits of relatedness are distinct from standard notions of synergy. To show support for this idea, we provide a mathematical model, descriptive data, and company examples. Managerial summary: The ability to redeploy resources inside the firm reduces the cost of entry mistakes. If a new business turns out to have poor profitability, the ability to redeploy more of its resources back into the firm's other businesses allows recycling of investment and can speed up the retreat. This reduces not only the cost of exit, but also the cost of entry. Managers should therefore be more willing to experiment and take risks in developing businesses that are more related to the firm's existing businesses, whereas if redeployment is likely to be difficult, managers should be cautious about entering. New businesses should be chosen in ways that facilitate redeployment, and managers should consider the implications of redeployment when setting the performance thresholds that justify entry and exit. Copyright (C) 2016 John Wiley & Sons, Ltd.