UCL School of Management

Research seminar

Learning to Divest: An examination of the Role of Indirect Experience


Patia McGrath, The Wharton School of Business, University of Pennsylvania


Wednesday, 3 December 2014
11:00 – 12:30
Room G21a Senate House, Malet Place, London WC1E 7HU

This paper explores whether some firms are more successful than others at the scope reduction process of divestiture, and, if so, whether divestiture capability may be the basis of any such performance heterogeneity. To address these questions, the issue of how divestiture performance should be evaluated is considered, as is the impact of indirect experience on the firm’s divestiture learning process. These questions are studied using a large sample of cross-industry and cross-border divestitures originating from public U.S. firms during a twenty-six year period. It is found that all three sources of indirect divestiture experience – transfer, observation, and purchase – influence firm divestiture performance, but not always beneficially. The results further suggest that, although firms can indeed develop meaningful divestiture capabilities, managerial tradeoffs across measures of divestiture performance are a necessary consequence of their advancement. Facilitated by its focus on the divestiture process itself, this paper not only offers new insights into an important mode of corporate development, but also, crucially, reveals surprising complexities in firm divestiture capability development and its relationship with performance.

Open to
Executive Education: Project Management
All students
Last updated Monday, 1 December 2014