Abstract
Many studies illustrate that restructuring efforts such as business exit have a strategic dimension. This point of view is based on several assumptions: “The first assumption is that strategic restructuring is typically a response to changing environmental and/or organizational conditions. The second assumption is that environmental and organizational pressures are largely, but not totally, identifiable and unambiguous in initiating such restructuring. The third and fourth assumptions are that many organizations currently face these clear pressures for a strategic adaptive response, and that many of these organizations seek to respond by restructuring. A fifth and final assumption is that restructuring generally enhances organizational performance. Taken together, these assumptions form the basis for a strategic perspective on restructuring: namely, that there are pressures that provide a stimulus for corporate restructuring, that these forces affect many organizations, many of whom respond by restructuring, which enhances performance.” Specifically, what is then the strategic dimension of the asset restructuring transaction “business exit”?
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References
See, e.g., Burgelman (1994, 1996), Hayward & Shimizu (2006); Zajac & Kraatz (1993).
Zajac & Kraatz (1993), p. 84.
For instance, “identifiable and unambiguous” conditions that initiate business exit can be the antecedents which have been outlined in Chapter 2.2 and summarized in Cluster 1. Antecedents in Chapter 2.5.
Cf. Markides (1995), p. 4.
See Chapter 1 for more details.
See Chapter 2.4.3 and Cluster 3. Outcomes in Chapter 2.5.
See Chapter 2.4.1.
See, e.g., Chang (1996).
See, e.g., Markides (1992a, 1992b, 1995).
Cf. Markides (1992b), p. 92.
Cf. Helfat & Eisenhardt (2004), p. 1220.
Cf. Byerly et al. (2003), p. 537; Lockett & Thompson (2001), p. 733. Markides (1992b) denotes this move as de-diversification, while Johnson (1996) refers to downscoping.
Cf. Berni (2006), p. 17.
Cf. Byerly et al. (2003), p. 537; Greve (1990), p. 590.
Cf. Brück (2006), p. 86.
Cf. Byerly et al. (2003), p. 539; Sommers et al. (1987), p. 18.
Cf. Handelsblatt (2007), n. p.
Cf. Hoskisson & Johnson (1992), pp. 626 and 633; Scott (2001), pp. 58 f.
Cf. Morrow et al. (2004), p. 190.
Cf. Beck et al. (2006), p. 2 ff.
See especially Chapter 2.5 and the examples mentioned there.
See Chapter 2.
For example, Jürgen Hambrecht, CEO of the German chemistry firm BASF, spends approximately 25 percent of his time with meeting investors all over the world. Cf. Wirtschaftswoche (2007), p. 127.
Cf. Zuckerman (2000), p. 592.
Cf. Chang (1996), p. 590.
Cf. Dranikoff et al. (2002), p. 78.
Cf. Sommers et al. (1987), p. 25 ff.; Isabella (1990), p. 10.
For more details on the legitimacy concept in institutional theory see Chapter 3.2.2.
Succi-Lopez et al. (2003, p. 309) draw on institutional theory in their study on divestitures in health care systems. However, claims for legitimacy do not refer to the divesting parent system but the unit to be divested. Moreover, the authors neither differentiate between legitimacy types and their drivers nor types of business exit.
Cf. Farashahi et al. (2005), p. 4.
Scott (2001), p. 21 f.
Cf. Walgenbach (1999), p. 319 f.
Meyer and Rowan’s (1977) article which can be considered as one of the milestones in the development of institutional theory, criticizes the insufficient adoption of Max Weber’s thoughts on bureaucracy in the study of organizations after World War II. However, in contrast to Weber, these authors do not consider efficiency and legitimacy requirements as congruent. According to them, organizations do not develop formal structures in order to solve problems as efficiently as possible but to gain legitimacy. Their central thesis is that formal structures are an outcome of myths that are institutionalized in the social environment of organizations. By adopting them, organizations create structural similarity and assure their capability to survive (cf. Hasse & Krücken 1999, p. 13 f.).
The sociologist Lynne Zucker’s (1977) work as another milestone of institutional thinking emphasizes the importance of perceptions and cognitive beliefs for social behavior as well as the adoption of social knowledge. Zucker (a student of Meyer) argues that social settings vary regarding the stability of their influence on social actors. They provoke perceptions, judgments and reactions which are relatively independent of social actors. Institutionalized social settings result in a certain behavior without the internalization of norms and without the necessity to reward compliant or sanction diverging behavior (cf. Hasse & Krücken 1999, p. 18 ff.; Scott 2001, p. 43.).
Cf. Bresser & Millonig (2003), p. 223 f.
Cf. Scott (2001), p. 42 f.
Cf. DiMaggio & Powell (1991), p. 64; Oliver (1997), p. 700.
DiMaggio & Powell (1991), p. 66.
Cf. Walgenbach (1999), p. 319; Oliver (1997), p. 699; Scott (1987), p. 504.
DiMaggio & Powell (1991), p. 64 f.
Cf. DiMaggio & Powell, (1991), p. 65.
Cf. DiMaggio & Powell (1991), p. 67
Cf. Ferlie & Pettigrew (1996), p. 509; see also Walgenbach (1999), p. 330 ff.
Cf. Suchman (1995), p. 571.
Suchman (1995), p. 574.
Cf. Scott (1987), p. 498; Suchman (1995), p. 575.
Cf. Oliver (1997), p. 699.
Cf. Grant (2002), p. 76 f. and 78 f.; Chow & Hamilton (1993), p. 11 f.
Cf. Peel (1995), p. 93.
Cf. Varadarajan et al. (2001), p. 19 f.
Ingram & Silverman (2002), p. 16.
Scott (2001), p. 49.
Cf. Walgenbach (1999), p. 320 f; Scott (2001), p. 48 ff.
Cf. Scott (2001), p. 96 f. The diffusion of once established institutions depends on the characteristics of their propagators, such as regulatory authority, normative power, or their cultural-cognitive impact. Influential diffusion agents are, e.g., the state, professions, international organizations and associations, or cultural frameworks (see Scott 2001, pp. 114–132, for more details on this issue).
Cf. Oliver (1992), p. 564.
Self-developed table summarizing the main aspects outlined above and taking into account the criteria suggested by Williamson (1999).
Cf. Bresser & Millonig (2003), p. 226 and 230.
See, e.g., Makhija (2004); Zuckerman (2000); Varadarajan et al. (2001); Deephouse (1996); Sherer & Lee (2002).
Scott (1987), p. 509.
For more details on this debate see Zajac & Westphal (2004a, b) and Zuckerman (2004). 228 See, e.g., Westphal & Zajac (1994, 1998, 2001); Kraatz & Zajac (1996); Zajac et al. (2000); Zajac & Westphal (2002). See also Bresser & Millonig (2003).
See Oliver (1997), Deephouse (1999), Rao (1994), and Bansal (2005) for more details.
Oliver (1997) exclusively refers to resource acquisition processes. Bresser and Millonig (2003, p. 228 ff.) extend her model by investigating the issue of how the institutional context might be a source of competitive advantage for organizations.
Cf. Oliver (1997), p. 700.
Figure adopted from Oliver (1997), p. 699.
Cf. Oliver (1997), p. 701 ff. “For example, General Mill’s delay in moving away from its original core business (commodity flour) toward more value-enhancing competencies (Porter, 1980) resulted from the uncertainty and discomfort of relinquishing a core tradition” (Oliver 1997, p. 703).
Cf. Bresser & Millonig (2003), p. 230, and the studies quoted there.
Cf. Oliver (1997), p. 704 f.
Oliver (1997), p. 705.
Cf. Bresser & Millonig (2003), p. 232.
Cf. Oliver (1997), p. 706 ff.
Cf. Dacin et al. (2002), p. 45; Martinez & Dacin (1999), p. 76; Oliver (1997), p. 698; Suchman (1995), p. 576.
Martinez & Dacin (1999), p. 79.
Table adopted from Oliver (1997), p. 710.
This view is consistent with Suchman’s (1995, p. 576) strategic approach to legitimacy. In contrast, sociological theorists consider legitimacy as a set of beliefs.
Cf. Pfeffer & Salancik (1978), p. 35.
Cf. Zimmerman & Zeitz (2002), p. 414; Demil & Bensédrine (2007), p. 60. In this vein, Dacin et al. (2002, p. 47 f.) emphasize the impact of change agents that undertake the required strategic actions.
Cf. Demil & Bensédrine (2007), p. 59; Beck et al. (2006), p. 5.
Morrow et al. (2007), p. 272.
Barney (1991), p. 105.
Cf. Barney (1991), p. 107 ff. See also Chapter 3.2.2.2 for more details on inimitability.
Hannan & Freeman (1984), p. 152.
North (1990), p. 98 f.
Referring to cost and asset retrenchment, see, e.g., Robbins & Pearce (1992) and Morrow et al. (2004).
Zimmerman & Zeitz (2002), p. 418.
Cf. Ruef & Scott (1998), p. 890 and 903 f. For more examples for the measurement of legitimacy and its drivers, respectively, see also the selected empirical studies that are listed in Table 2 in Appendix 1.
See Chapter 4 with regard to measurement issues and the overview on study variables in Table 4 in Appendix 1.
See, e.g., Aldrich & Fiol (1994), p. 648 f.; Dacin et al. (2007), p. 172 f.; Ruef & Scott (1998), p. 877. With reference to entrepreneurial firms in emerging industries, Aldrich and Fiol outline cognitive and socio-political legitimacy. Referring to strategic alliances, Dacin et al. differentiate between market, relational, social, investment, and alliance legitimacy. Focusing on the survival of hospitals in dynamic environments, Ruef and Scott distinguish between managerial and technical legitimacy. Following Scott (2001, p. 51 ff.), Sanders and Tuschke (2007) investigate regulatory, normative and cultural-cognitive legitimacy. Suchman (1995) differentiates between pragmative, moral, and cognitive legitimacy.
Referring to the concept of a “dominant logic”, see Prahalad & Bettis (1986). The concept means that the way in which top managers deal with strategic decisions in a firm, depends on their cognitive orientation. A “dominant logic” consists of the top managers’ mental maps and frameworks that they developed through experience. Prahalad and Bettis (1995) further argue that it provides a number of heuristics that accelerate and simplify decision-making in firms.
This point reflects Dacin et al.’s (2007) idea that the pursuit of legitimacy enhances a firm’s reputation and hence increases its chance to survive, i.e., technical efficiency.
Cf. Massey (2001), p. 153.
Cf. Demil & Bensédrine (2007), p. 59.
Cf. Massey (2001), p. 156 f.
Cf. Suchman (1995), p. 572; Zimmerman & Zeitz (2002), p. 421. The strategic is the counterpart of the institutional tradition where cultural pressures which are generated by structuration dynamics take center stage.
Demil & Bensédrine (2007), p. 59.
Cf. Zimmerman & Zeitz (2002), p. 414.
See, e.g., Chang (1996); Montgomery & Thomas (1988); Cho & Cohen (1997).
See, e.g., the Thorn EMI case outlined by Kaiser & Stouraitis (2001); see also Barker & Duhaime (1997), p. 34; Chen & Guo (2005), p. 411; Lant et al. (1992), p. 596 and 601.
Cf. Morrow et al. (2007), p. 272, and the studies quoted there.
Cf. Zimmerman & Zeitz (2002), p. 417.
Cf. Hanson & Song (2003), p. 323; Stieglitz & Heine (2007), p. 3; Voelpel et al. (2006), p. 260.
See Chapter 2.
Schilling (1998), p. 275. Some firms may find it useful to provide associated goods and services. For example, the game machine manufacturer Nintendo concludes exclusive contracts with game producers such as Acclaim in order to assure that its technology is accepted by consumers. However, this strategy can fail due to high transaction costs and the dependence on other vendors.
For more details on technological lockout and related studies see Schilling (1998, 2002).
Cf. Dacin et al. (2002), p. 53.
See, e.g., Byerly et al. (2003); Johnson (1996); Markides (1992a, 1992b); Nicolai & Thomas (2006); Steiner (1997).
Cf. Stieglitz & Heine (2007), p. 9.
This point is especially illustrated by studies by Davis et al. (1994) and Zuckerman (2000). See also Stieglitz & Heine (2007), p. 3.
Cf. Hambrick & Cannella (1989), p. 278.
See, e.g., Bigley & Wiersema (2002); Gordon et al. (2000); Hayward & Shimizu (2006); Kaiser & Stouraitis (2001); Matthyssens & Pauwels (2000); Ravenscraft & Scherer (1991); Shimizu & Hitt (2005); Wiersema (1992, 1995).
Cf. Gilson (1989), p. 246 f. and 250.
Cf. Gilson (1989), p. 253 ff.; Gilson & Vetsuypens (1993), p. 439 and 456; Whetten (1980), p. 577 ff.
Cf. Audia & Brion (2007), p. 266.
Cf. Zimmerman & Zeitz (2002), p. 420; see also Hannan & Freeman (1984), p. 154.
Cf. Hannan & Freeman (1984), p. 156 ff.
Burgelman (1994), p. 48.
Cf. Isabella (1990), p. 8. See Chapter 3.3 and the literature quoted there referring to “dominant logic”.
Cf. Burgelman (1994), p. 49; Isabella (1990), p. 9.
Cf. Hayward & Shimizu (2006), p. 543.
Cf. Kraatz & Moore (2002), p. 121.
Lant et al. (1992), p. 591.
Isabella (1990), p. 10.
Cf. Barker & Duhaime (1997), pp. 20 and 33; Dacin et al. (2002), p. 47; Hambrick et al. (1993), p. 402; Hannan & Freeman (1984), p. 155 f.; Kraatz & Moore (2002), p. 122 f.; referring to personal legitimacy see also Suchman (1995), p. 581.
Beck et al. (2006), p. 3.
Cf. Zimmerman & Zeitz (2002), p. 424.
See, e.g., Varadarajan et al. (2001); Zuckerman (2000).
Cf. Walgenbach (1999), p. 319; Oliver (1997), p. 699; Scott (1987), p. 504. See also Chapter 3.2.2.
Cf. Dohm (1989), p. 51; see also Davis et al. (1994) and Zuckerman (2000). This is especially the case in Europe where more strongly diversified companies are typically “punished” with a conglomerate discount. In contrast, Asian and American investors tend to recognize that more diverse companies can outperform rather focused firms in the long run and more likely reward these companies with a good valuation than European investors (cf. Mönnighoff 2006, p. 30).
Findings by Baker et al. (1996) illustrate this point. Traditionally, institutional theory defines institutions as, e.g., regulatory structures, governments, or professions. However, interest groups or the public opinion which is spread throughout the media can also be considered as influential institutions, especially with regard to for-profit-organizations (cf. Oliver 1991, p. 147).
Cf. Oliver (1991), p. 151. Oliver criticizes that institutional theory neglects the ability of firms to actively influence the relationships that exist between organizations and their environment.
Cf. Oliver (1991), p. 152. See also Haacke (2006), p. 127 and 130.
Zuckerman (2000), p. 592.
Zimmerman & Zeitz (2002), p. 419. See also Kraatz & Moore (2002), p. 126, especially Hypothesis 4b.
Cf. Zuckerman (2000), p. 593 and 596; Varadarajan et al. (2001), p. 18. Referring to the punishment of conglomerates in Europe with a discount of up to 30 percent, see also Mönnighoff (2006), p. 30.
Cf. Wildhagen & Esterhazy (2006), p. 60. Linde’s market value strongly increased during the restructuring process.
Cf. Schnitzler (2006), p. 108 ff.
Cf. Dacin et al. (2002), p. 47 f.
Cf. Haunschild & Miner (1997), p. 479.
Cf. Ditillo (2004), p. 407 f. Ditillo’s literature review is very selective due to his specific research focus (see p. 408, especially footnote 11).
Miller (1992), p. 312.
Cf. Henisz & Delios (2001), p. 443, see also p. 445 for further details.
See, e.g., Miller (1992), p. 313 ff., for a detailed overview on this topic.
Beckman et al. (2004), p. 260.
Cf. DiMaggio & Powell (1991), p. 75; Martinez & Dacin (1999), p. 87.
Dacin et al. (2007), p. 181 f.
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(2008). Theory and Hypotheses. In: Legitimacy Needs as Drivers of Business Exit. Gabler. https://doi.org/10.1007/978-3-8349-9759-3_3
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