New CEOs and Corporate Strategic Refocusing: How Experience as Heir Apparent Influences the Use of Power

Bigley, Gregory A.; Wiersema, Margarethe F.

doi:10.2307/3094914

Cited by 219 publications

(179 citation statements)

References 91 publications

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“…More specifically, CEOs often experience a great deal of pressure to produce strong results in the early years of their tenures (Finkelstein and Hambrick 1990, Hambrick and Fukutomi 1991, Ocasio 1994, potentially explaining why they are the most likely to implement major organizational changes (Miller and Friesen 1980, Wiersema and Bantel 1992, Hambrick et al 1993, Bigley and Wiersema 2002, Shimizu and Hitt 2005. As a result, a new or recently-appointed CEO may feel the strongest urgency to divest his firm's legacy business to gain the benefit of the favorable stock market response that is expected to accompany that divestiture.…”

Section: Legacy Divestitures: Motivesmentioning

confidence: 99%

Legacy Divestitures: Motives and Implications

Feldman

2014

Organization Science

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This paper investigates "legacy divestitures," the sale or spinoff of a company's original, or "legacy," business. The central tension considered in this work is that the historical presence of a firm's legacy business should simultaneously make that unit very interdependent with the company's remaining operations and make the firm's managers highly likely to take those same interdependencies for granted. Consistent with these predictions, the post-divestiture operating performance of firms that divest their legacy businesses falls short of that of firms that retain comparable legacy units, especially when the divested unit operates in the same industry as others of the divesting firm's businesses. Newer chief executive officers (CEOs) are more likely to undertake legacy divestitures than their longer-tenured peers, and the most recently appointed CEOs undertake the most costly legacy divestitures. In summary, this paper provides insights into how historical interdependencies create value in diversified firms, as well as the decision-making processes that managers follow in overseeing these companies. Abstract This paper investigates "legacy divestitures," the sale or spinoff of a company's original, or "legacy" business. The central tension considered in this work is that the historical presence of a firm's legacy business should simultaneously make that unit very interdependent with the company's remaining operations and make the firm's managers highly likely to take those same interdependencies for granted. Consistent with these predictions, the post-divestiture operating performance of firms that divest their legacy businesses falls short of that of firms that retain comparable legacy units, especially when the divested unit operates in the same industry as others of the divesting firm's businesses. Newer CEOs are more likely to undertake legacy divestitures than their longer-tenured peers, and the most recently-appointed CEOs undertake the most costly legacy divestitures. In sum, this paper provides insights into how historical interdependencies create value in diversified firms, as well as the decision-making processes managers follow in overseeing these companies.

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Section: Legacy Divestitures: Motivesmentioning

confidence: 99%

Legacy Divestitures: Motives and Implications

Feldman

2014

Organization Science

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“…In particular, non-routine executive succession processes nurture business exit. Similarly, CEOs coming from outside or with tenure of less than ten years are more likely to make incisive strategic decisions than those with longer tenure because they are better able to resist inertial forces (Bigley & Wiersema, 2002;Hayward & Shimizu, 2006;Matthyssens & Pauwels, 2000;Ravenscraft & Scherer, 1991;Shimizu & Hitt, 2005;Wiersema, 1995). The situation is different for firms that need to divest but are solvent and those that are financially distressed and even fear bankruptcy.…”

Section: Corporate Governancementioning

confidence: 87%

“…The deterrence of exit can be an outcome of escalating commitment which effectively deters necessary exit decisions. Thereby, CEO tenure can act as a strong impediment because longer tenure leads to a higher reluctance to change the strategic status quo (Bigley & Wiersema, 2002;Matthyssens & Pauwels, 2000;Ross & Staw, 1993).…”

Section: Managerial Exit Barriersmentioning

confidence: 99%

Thirty Years After Michael E. Porter: What Do We Know About Business Exit?

Decker

Mellewigt

2007

AMP

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Executive OverviewAlthough a business exit is an important corporate change initiative, the buyer's side seems to be more appealing to management researchers than the seller's because acquisitions imply growth, i.e., success. Yet from an optimistic viewpoint, business exit can effectively create value for the selling company. In this paper we attempt to bring the relevance of the seller's side back into our consciousness by asking: What do we know about business exit? We start our exploration with Porter (1976), focusing on literature that investigates the antecedents of, barriers to, and outcomes of business exit. We also include studies from related fields such as finance and economics. 1 Through this research we determine three clusters of findings: factors promoting business exit, exit barriers, and exit outcomes. Overall, it is the intention of this paper to highlight the importance of business exit for research and practice. Knowing what we know about business exits and their high financial value we should bear in mind that exit need not mean failure but a new beginning for a corporation.B usiness exit is an asset restructuring activity involving a diversified firm's divestiture of one of its businesses, such as Intel's abandonment of its DRAM business (Burgelman, 1996). Interest in this topic can be traced back to publications that represent milestones in economic research such as Bain (1956), who established the concept of barriers to entry, Caves ' (1964) analysis of the American industry, and the seminal article on exit barriers by Porter published in California Management Review in 1976, which helped raise the interest in business exit among a broad audience. Data from the U.S. illustrate that business exit continues to be relevant (cf. Figure 1). In the U.S., business services, real estate, and software were the most active divesting industries in 2005. A recent study by the consulting company Accenture highlights the growing relevance of business exits for years to come and predicts that " [f]or the next years, many companies will give far more thought to divestitures than they did in the late 1990s" (Anslinger, Jenk, & Chanmugam, 2003).Although a business exit is an important corporate change initiative, the buyer's side seems to be more appealing to management researchers than the seller's because acquisitions imply growth, i.e., success. This preference for the "success" side can be seen at the industry level as well. Managers, for example, may resist business exit because it is afflicted with the stigma of failure and is often seen as a result of poor corporate management. The reluctance of managers to admit that their organization or at least parts of it are in trouble is evidence of their substantial personal preoccupation with growth and their large personal costs in case of exit (Gilson, 1989). Yet from an optimistic point of view, business exit can effectively create value for the selling company. Indeed, the stigma certainly wasn't a factor for former GE CEO Jack Welch. Under his leadersh...

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“…Cette expérience est, en effet, d'une grande importance pour comprendre comment sont prises les décisions aussi bien au plan de l'individu qu'au plan de l'organisation (Simon, 1991). Bien que l'expérience ait été le sujet de nombre de recherches en sciences de l'organisation, le terme lui-même n'est que rarement défini (par exemple, Haleblian et Finkelstein, 1999 ;Bigley et Wiersema, 2002). On définira ici l'expérience comme « la connaissance résultant de l'observation effective ou d 'un vécu » (Oxford, 2005).…”

Section: L'expérience Régulatrice De L'internationalisationunclassified

Le comportement d’internationalisation des PME suisses

Baldegger

Schueffel

2009

ipme

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Résumé L’objectif de cette étude est de mettre en évidence les facteurs qui incitent une entreprise à adopter une trajectoire d’expansion traditionnelle ou plutôt de type « born global », facteurs généralement présentés comme contradictoires par les chercheurs. Pour ce faire, un modèle destiné à prédire le mode d’expansion a été testé empiriquement. L’analyse de 215 PME en Suisse permet de tirer des conclusions intéressantes pour les praticiens. Parmi celles-ci, relevons que la majorité des entreprises exportent au plus dans cinq pays, et que, de ce point de vue, l’Allemagne est le partenaire le plus important des PME suisses, le marché allemand servant de marché test. L’étude fait ressortir clairement le fait que plus les entreprises sont jeunes, plus le temps qu’elles prennent pour s’internationaliser est court. Cela implique que les entreprises établies de longue date doivent s’attendre à une concurrence féroce de la part d’entreprises nouvellement créées.

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New CEOs and Corporate Strategic Refocusing: How Experience as Heir Apparent Influences the Use of Power

Cited by 219 publications

References 91 publications

Legacy Divestitures: Motives and Implications

Legacy Divestitures: Motives and Implications

Thirty Years After Michael E. Porter: What Do We Know About Business Exit?

Le comportement d’internationalisation des PME suisses

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