Business portfolio reconfiguration and firm performance: The contingency role of organizational capabilities, slack and ownership

Abstract

The purpose of this study aims to explore the relationships between business portfolio reconfiguration and firm performance in developing countries as well as the moderating roles played by organizational slack, capabilities and ownership structure. By using the perspectives of dynamic capabilities, resources-based view and social network, this study proposes that there is a U-shaped relationship between business portfolio reconfiguration and firm performance. Furthermore, while R&D capability, marketing capability and foreign ownership are expected to positively moderate this U-shaped relationship, organizational slack, state and domestic ownership may potentially make this U-shaped relationship less pronounced. We draw our observations from Shanghai and Shenzhen Stock Exchanges in China from 2008 to 2017, and obtain 26,151 firm-year observations, which are consisted of 3,508 publicly traded companies. The results generally support our hypotheses, and some theoretical and practical implications are extracted from this study.

How does capability reconfiguration impact the innovation performance of Chinese manufacturing firms?

“…In recent years, capability reconfiguration has become an important driving force for enterprises to accelerate innovation and enhance competitiveness ( Chen et al, 2022 ). However, there are still different voices about whether evolutionary and substitutional capability reconfiguration can contribute a positive role to innovation performance ( Karim and Capron, 2016 ; Girod and Whittington, 2017 ).…”