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Proactive Divestiture and Business Innovation: R&D Input and Output Performance

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  • Kyungsuk Lee

    (Graduate School of Arts and Sciences, Columbia University in the City of New York, 535 W 116th St #109, New York, NY 10027, USA)

  • Taewoo Roh

    (Department of International Trade and Commerce, Soonchunhyang University, Chungchungnam-do 31538, Korea)

Abstract

We investigate the impact of proactive divestitures on innovative activities at a firm-level. Research concerning the relationship between proactive divestiture and innovation performance remains unexplored and requires a close investigation. Furthermore, we argue that proactive-divestiture is an essential means to achieve corporate sustainability by fostering innovation outcomes. To explore such a relationship, this study integrates research on knowledge-based view and organizational inertia and encompasses the model of financial distress. We hypothesize that proactive divestiture increases both the firm’s R&D intensity and the number of patents and propose that prior divestiture experiences and divested-unit size would moderate this relationship. Results indicate that proactive post-divestiture firms have increased in R&D inputs but not significantly in output. We found mixed results for such a relationship as prior experiences increased, but interestingly, the relationship revealed to be more significant for both input and output as divested-unit size decreased. This study contributes to our understandings of how proactive divestiture can reinforce knowledge capacity, distant from a traditional resource-based view that mainly regarded divestiture as a mere responsive action vis-à-vis financial pressure.

Suggested Citation

  • Kyungsuk Lee & Taewoo Roh, 2020. "Proactive Divestiture and Business Innovation: R&D Input and Output Performance," Sustainability, MDPI, vol. 12(9), pages 1-19, May.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:9:p:3874-:d:355898
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    Cited by:

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    2. Yuanyuan Dong & Zepeng Wei & Tiansen Liu & Xinpeng Xing, 2020. "The Impact of R&D Intensity on the Innovation Performance of Artificial Intelligence Enterprises-Based on the Moderating Effect of Patent Portfolio," Sustainability, MDPI, vol. 13(1), pages 1-17, December.
    3. Shih-chi (Sana) Chiu & Azadeh Sabz, 2022. "Can Corporate Divestiture Activities Lead to Better Corporate Social Performance?," Journal of Business Ethics, Springer, vol. 179(3), pages 849-866, September.
    4. Yunjae Bae & Kyungsuk Lee & Taewoo Roh, 2020. "Acquirer’s Absorptive Capacity and Firm Performance: The Perspectives of Strategic Behavior and Knowledge Assets," Sustainability, MDPI, vol. 12(20), pages 1-28, October.

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