Organizational learning and corporate diversification performance

Panayiotis C. Andreou, Christodoulos Louca and Andreas P. Petrou

Journal of Business Research, 2016, vol. 69, issue 9, 3270-3284

Abstract: This study investigates the role of organizational learning on the valuation effects of corporate diversification. The empirical findings suggest that corporate diversification reduces shareholders' wealth. However, consistent with the absorptive capacity viewpoint of organizational learning, diversification performance depends on repetitive and accumulative experiences that relate to a firm's prior diversification activity and/or a firm's experience in operating in multiple-business segments. Specifically, single-business firms that diversify once demonstrate significant value reduction. In contrast, multi-business firms that diversify once do not demonstrate value reduction, while single/multi-business firms that diversify multiple times demonstrate value creation. Findings also reveal that performance is conditional on the mode of diversification since internal growth diversification shows higher valuation effects than diversifications through acquisitions. These findings contribute to the literature by affirming the importance of organizational learning, a cognitive and behavioral perspective, in explaining the valuation effect of corporate diversification.

Keywords: Organizational learning; Absorptive capacity; Diversification; Repetitive experience; Accumulative experience; Diversification discount (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S014829631600093X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:69:y:2016:i:9:p:3270-3284

DOI: 10.1016/j.jbusres.2016.02.022

Access Statistics for this article

Journal of Business Research is currently edited by A. G. Woodside

More articles in Journal of Business Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().