What determines firm outcomes in terms of acquisition, dissolution, and survival? This article answers this crucial question of strategy and elaborates on the extent to which the outcome is under top management control. Our findings highlight the importance of technology investments and we identify factors that make such investments possible and profitable. Our results emphasize that firms weighing options must assess the economic meaningfulness of generational technology investments which result in narrowing profit margins and intensifying competition. Another insight concerns the management of political risks. Long‐term fluctuations in regulation and foreign trade policy make it hazardous to optimize to the contemporary political regime. Skillful strategists invest in geographical and technological complexity, which in combination increase the chances of survival in rapidly changing political regimes.
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 .
Venture capital funds have alimited lifecycle. As the fund ages, venture capitalists(VCs) are motivated to promote venture exit discus-sions with the venture board. We investigate the impactof VCs' exit pressure on the hazard of four types of ven-ture exit (IPO, high-value M&A, low-value M&A, andliquidation), considering how VCs' exit pressure influ-ences board collaboration. We find that while the VCs'exit pressure does not affect the hazard of IPOs, thepressure significantly increases the hazard of M&A andliquidation. Achieving important milestones does notreduce the impact of exit pressure on the hazard oflow-value M&A and liquidation. Independent directorsmoderate the impact of the VC's exit pressure, increas-ing the hazard of high-value M&A and lessening thehazard of liquidation
