Proactive Divestiture and Business Innovation: R&D Input and Output Performance

Kyungsuk Lee and Taewoo Roh
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Kyungsuk Lee: Graduate School of Arts and Sciences, Columbia University in the City of New York, 535 W 116th St #109, New York, NY 10027, USA
Taewoo Roh: Department of International Trade and Commerce, Soonchunhyang University, Chungchungnam-do 31538, Korea

Sustainability, 2020, vol. 12, issue 9, 1-19

Abstract: We investigate the impact of proactive divestitures on innovative activities at a firm-level. Research concerning the relationship between proactive divestiture and innovation performance remains unexplored and requires a close investigation. Furthermore, we argue that proactive-divestiture is an essential means to achieve corporate sustainability by fostering innovation outcomes. To explore such a relationship, this study integrates research on knowledge-based view and organizational inertia and encompasses the model of financial distress. We hypothesize that proactive divestiture increases both the firm’s R&D intensity and the number of patents and propose that prior divestiture experiences and divested-unit size would moderate this relationship. Results indicate that proactive post-divestiture firms have increased in R&D inputs but not significantly in output. We found mixed results for such a relationship as prior experiences increased, but interestingly, the relationship revealed to be more significant for both input and output as divested-unit size decreased. This study contributes to our understandings of how proactive divestiture can reinforce knowledge capacity, distant from a traditional resource-based view that mainly regarded divestiture as a mere responsive action vis-à-vis financial pressure.

Keywords: innovative activities; divestiture; prior experiences; proactiveness; relative size; business innovation performance (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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