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Scholars in strategy and entrepreneurship have discussed the benefits and difficulties of keeping ventures inside the firm versus separating them through divestitures and the balance between control and autonomy. Using an in-depth analysis of cases of partial divestitures, this study examines the organizational arrangement that arises from divestitures with a retained parent-unit relationship. The emerging framework connects the parent-unit relationship and its modifications along the divestiture's objective – specifically, the exploration carried out by the unit. Partial divestitures are designed as real options, for firms to manage corporate venturing, taking advantage of the flexibility that such arrangement may grant.
Divestitures, understood as the parent company’s disposal and sale of assets, facilities, product lines, subsidiaries, divisions and business units, are emerging as a central topic of research in several areas. Yet our understanding of these operations is still limited. For
example, it is still not clear whether divestitures are merely a reflection of the economic cycle, a means to correct or reverse previous strategic decisions, or a proactive strategic option. Integrating literature in finance, strategy, and organizational behavior, this paper
offers a comprehensive picture of divesting modes, antecedents, mechanisms and outcomes of divestitures. It integrates empirical findings and theoretical contributions into a researchable whole, in order to identify common themes and gaps in existing research. The final objective of this analysis and review is to propose meaningful avenues for future research to improve knowledge on divestitures.
Existing literature argues that divested units are unwanted and poor performers – yet evidence suggests that companies do divest well performing units, and often retain a relationship with them, especially in the quest for innovation. This article presents an exploratory case study to examine how a company structures the divestiture of an innovative unit and how it can benefit from the innovation the unit generates. The analysis focuses on how an established company can use divestiture as a strategy to enhance the innovation of its units, and capture its value, by structuring, maintaining and nurturing a special relationship with the unbundled unit. Under new organizational arrangement, resources can be transferred from the parent to the unit, while the parent retains access to the innovation developed within the unit. This study proposes a framework that offers corporate change agents and strategists a new perspective on how to integrate innovation and corporate strategy.
Although most existing literature has focused on the motives and consequences of divestitures, we have little more than anecdotal evidence illustrating their design and implementation. Even less is known about the evolution of divestitures, especially when parent companies retain a relationship with the divested unit. Using a multi-method approach that blends quantitative analysis with insights from field research, this study analyzes how and why companies structure and implement divestitures. The resulting framework provides new insights for strategy scholars on how divestitures can be used to shape corporate strategies and our understanding of multi-business companies.