Boal,Kimberly; Jun Xia, David D. Dawley, Han Jiang, Rong Ma
Applications of signaling theory to predict reorganization outcomes are in their infancy. The dynamic integrative framework developed in this study is useful in identifying different types of signals and predicting outcomes of firms in crisis. The results of this study can be useful for various decision makers to predict the turnaround potential of bankrupt firms. Our results show that an increase in alliance partners, institutional investors, and securities analysts following a bankrupt firm predicts the firm's reorganization outcome. Moreover, firms that are able to gain positive attention from key stakeholders will also gain positive interpretations of their strategic efforts. Signals from alliance partners and institutional investors amplify the signaling effect of a firm's de‐diversification effort in predicting its reorganization outcome.
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 .
We examine one prevalent source of conflict: platform owners' entry into complementary product spaces. We show that app developers on Google's Android system are strategic and nimble actors. They respond to the threat of Google's entry by adjusting both value‐creation and value‐capture strategies. We also show that platform owners could use direct entry to shape innovation directions and encourage variety of complements. Overall, on the one hand, Google's entry may have pushed complementors into other areas (which might be less lucrative) and strengthened its position in the mobile market. On the other hand, the entry may have reduced wasteful production efforts in the development of redundant applications. The overall welfare implication is thus ambiguous.
