IDEAS home Printed from https://ideas.repec.org/a/sae/ausman/v41y2016i2p398-421.html
   My bibliography  Save this article

Intended rationality in exit decisions: The organizational field of rivals as a source of signal in segment exit decisions by Korean SI ventures, 2000–2006

Author

Listed:
  • Dongyoub Shin

    (School of Business, Yonsei University, Korea)

  • Sunhyuk Kim

    (College of Economics & Business, Korea University, Korea)

  • Kiwon Jung

    (School of Business, Yonsei University, Korea)

Abstract

This paper examines how the aggregated actions of rivals belonging to the same organizational field affect a firm’s exits from existing market segments. We argue that while a firm’s exit decisions are strongly influenced by the aggregated actions by other firms which may serve as an uncertainty-reducing signal, the focal firm’s strategic responses to signals from the organizational field of rivals are more complicated, informed, and rational, than is usually suggested. For instance, in its evaluation of signals about segment attractiveness based on the aggregated actions of rivals, the focal firm will give different weights to rivals’ actions according to the strength of competitive threat, will make refined inferences about the attractiveness of a segment based on the performances of rivals, and will give a greater weight to recent actions by rivals than to older ones. The results of our event history analysis of all segment exits by Korean SI ventures support all our hypotheses.

Suggested Citation

  • Dongyoub Shin & Sunhyuk Kim & Kiwon Jung, 2016. "Intended rationality in exit decisions: The organizational field of rivals as a source of signal in segment exit decisions by Korean SI ventures, 2000–2006," Australian Journal of Management, Australian School of Business, vol. 41(2), pages 398-421, May.
    • Handle: RePEc:sae:ausman:v:41:y:2016:i:2:p:398-421
    DOI: 10.1177/0312896215578477
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0312896215578477
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0312896215578477?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. William P. Barnett & Aimee-Noelle Swanson & Olav Sorenson, 2003. "Asymmetric selection among organizations," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 12(4), pages 673-695, August.
    2. Alexander Ljungqvist & William J. Wilhelm, 2003. "IPO Pricing in the Dot‐com Bubble," Journal of Finance, American Finance Association, vol. 58(2), pages 723-752, April.
    3. Donald D. Bergh, 1997. "Predicting divestiture of unrelated acquisitions: an integrative model of ex ante conditions," Strategic Management Journal, Wiley Blackwell, vol. 18(9), pages 715-731, October.
    4. Todd H. Chiles & Alan D. Meyer & Thomas J. Hench, 2004. "Organizational Emergence: The Origin and Transformation of Branson, Missouri's Musical Theaters," Organization Science, INFORMS, vol. 15(5), pages 499-519, October.
    5. Cynthia A. Montgomery & Ann R. Thomas, 1988. "Divestment: Motives and gains," Strategic Management Journal, Wiley Blackwell, vol. 9(1), pages 93-97, January.
    6. Pekka Ilmakunnas & Jukka Topi, 1999. "Microeconomic and Macroeconomic Influences on Entry and Exit of Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 15(3), pages 283-301, November.
    7. Rita Gunther McGrath & Atul Nerkar, 2004. "Real options reasoning and a new look at the R&D investment strategies of pharmaceutical firms," Strategic Management Journal, Wiley Blackwell, vol. 25(1), pages 1-21, January.
    8. Fernando F. Suárez & James M. Utterback, 1995. "Dominant designs and the survival of firms," Strategic Management Journal, Wiley Blackwell, vol. 16(6), pages 415-430.
    9. Richard J. Gilbert & Marvin Lieberman, 1987. "Investment and Coordination in Oligopolistic Industries," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 17-33, Spring.
    10. Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-824, December.
    11. Jun Xia & Justin Tan & David Tan, 2008. "Mimetic entry and bandwagon effect: the rise and decline of international equity joint venture in China," Strategic Management Journal, Wiley Blackwell, vol. 29(2), pages 195-217, February.
    12. Bernheim, B Douglas, 1984. "Rationalizable Strategic Behavior," Econometrica, Econometric Society, vol. 52(4), pages 1007-1028, July.
    13. Ming-Jer Chen & Ken G. Smith & Curtis M. Grimm, 1992. "Action Characteristics as Predictors of Competitive Responses," Management Science, INFORMS, vol. 38(3), pages 439-455, March.
    14. Levesque, Moren & Shepherd, Dean A., 2004. "Entrepreneurs' choice of entry strategy in emerging and developed markets," Journal of Business Venturing, Elsevier, vol. 19(1), pages 29-54, January.
    15. Donald D. Bergh & Michael W. Lawless, 1998. "Portfolio Restructuring and Limits to Hierarchical Governance: The Effects of Environmental Uncertainty and Diversification Strategy," Organization Science, INFORMS, vol. 9(1), pages 87-102, February.
    16. John L Naman & Dennis P. Slevin, 1993. "Entrepreneurship and the concept of fit: A model and empirical tests," Strategic Management Journal, Wiley Blackwell, vol. 14(2), pages 137-153, February.
    17. Jaideep Anand & Harbir Singh, 1997. "Asset Redeployment, Acquisitions And Corporate Strategy In Declining Industries," Strategic Management Journal, Wiley Blackwell, vol. 18(S1), pages 99-118, July.
    18. Jonathan O'Brien & Timothy Folta, 2009. "Sunk costs, uncertainty and market exit: A real options perspective," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 18(5), pages 807-833, October.
    19. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 69(1), pages 99-118.
    20. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    21. Thomas H. Brush & Philip Bromiley & Margaretha Hendrickx, 2000. "The free cash flow hypothesis for sales growth and firm performance," Strategic Management Journal, Wiley Blackwell, vol. 21(4), pages 455-472, April.
    22. Macmillan, Ian C. & Siegel, Robin & Narasimha, P. N. Subba, 1985. "Criteria used by venture capitalists to evaluate new venture proposals," Journal of Business Venturing, Elsevier, vol. 1(1), pages 119-128.
    23. Sayan Chatterjee & Jeffrey S. Harrison & Donald D. Bergh, 2003. "Failed takeover attempts, corporate governance and refocusing," Strategic Management Journal, Wiley Blackwell, vol. 24(1), pages 87-96, January.
    24. Sidney G. Winter & Gabriel Szulanski, 2001. "Replication as Strategy," Organization Science, INFORMS, vol. 12(6), pages 730-743, December.
    25. van Kranenburg, Hans & Palm, Franz C. & Pfann, Gerard A., 2002. "Survival in a Concentrating Industry: The Case of Daily Newspapers in the Netherlands," IZA Discussion Papers 565, Institute of Labor Economics (IZA).
    26. Sea Jin Chang & Harbir Singh, 1999. "The impact of modes of entry and resource fit on modes of exit by multibusiness firms," Strategic Management Journal, Wiley Blackwell, vol. 20(11), pages 1019-1035, November.
    27. Brian Mccann & Timothy Folta, 2009. "Sunk costs, uncertainly and market exit : a real options perspective," Post-Print hal-02312513, HAL.
    28. Jill R. Hough & Margaret A. White, 2003. "Environmental dynamism and strategic decision‐making rationality: an examination at the decision level," Strategic Management Journal, Wiley Blackwell, vol. 24(5), pages 481-489, May.
    29. ANITA M. McGAHAN & MICHAEL E. PORTER, 1997. "How Much Does Industry Matter, Really?," Strategic Management Journal, Wiley Blackwell, vol. 18(S1), pages 15-30, July.
    30. Karel Cool & Ingemar Dierickx, 1993. "Abstract," Strategic Management Journal, Wiley Blackwell, vol. 14(1), pages 47-59, January.
    31. Kent D. Miller & Andaç T. Arikan, 2004. "Technology search investments: evolutionary, option reasoning, and option pricing approaches," Strategic Management Journal, Wiley Blackwell, vol. 25(5), pages 473-485, May.
    32. Thomas P. Moliterno & Margarethe F. Wiersema, 2007. "Firm performance, rent appropriation, and the strategic resource divestment capability," Strategic Management Journal, Wiley Blackwell, vol. 28(11), pages 1065-1087, November.
    33. Javier Gimeno & Carolyn Y. Woo, 1996. "Hypercompetition in a Multimarket Environment: The Role of Strategic Similarity and Multimarket Contact in Competitive De-Escalation," Organization Science, INFORMS, vol. 7(3), pages 322-341, June.
    34. Jerker Denrell, 2003. "Vicarious Learning, Undersampling of Failure, and the Myths of Management," Organization Science, INFORMS, vol. 14(3), pages 227-243, June.
    35. Tversky, Amos & Kahneman, Daniel, 1986. "Rational Choice and the Framing of Decisions," The Journal of Business, University of Chicago Press, vol. 59(4), pages 251-278, October.
    36. James Henderson & Karel Cool, 2003. "Corporate governance, investment bandwagons and overcapacity: an analysis of the worldwide petrochemical industry, 1975–95," Strategic Management Journal, Wiley Blackwell, vol. 24(4), pages 349-373, April.
    37. Marian Chapman Moore, 1992. "Signals and Choices in a Competitive Interaction: The Role of Moves and Messages," Management Science, INFORMS, vol. 38(4), pages 483-500, April.
    38. Richard P. Rumelt, 1991. "How much does industry matter?," Strategic Management Journal, Wiley Blackwell, vol. 12(3), pages 167-185, March.
    39. H. Van Kranenburg & F. Palm & G. Pfann, 2002. "Exit and Survival in a Concentrating Industry: The Case of Daily Newspapers in the Netherlands," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 21(3), pages 283-303, November.
    40. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Heather Berry, 2013. "When Do Firms Divest Foreign Operations?," Organization Science, INFORMS, vol. 24(1), pages 246-261, February.
    2. Elena Vidal & Will Mitchell, 2015. "Adding by Subtracting: The Relationship Between Performance Feedback and Resource Reconfiguration Through Divestitures," Organization Science, INFORMS, vol. 26(4), pages 1101-1118, August.
    3. Viacheslav Iurkov & Gabriel R G Benito, 2020. "Change in domestic network centrality, uncertainty, and the foreign divestment decisions of firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(5), pages 788-812, July.
    4. Ding, Yang, 2021. "Antecedents and implications of legacy divestitures," Other publications TiSEM f4d5766f-6a5b-43a3-94df-1, Tilburg University, School of Economics and Management.
    5. Wu, Yan & Strange, Roger & Shirodkar, Vikrant, 2021. "MNE divestments of foreign affiliates: Does the strategic role of the affiliate have an impact?," Journal of Business Research, Elsevier, vol. 128(C), pages 266-278.
    6. Rehnen, Lena Marie, 2016. "Exit strategies of loyalty programs," jbm - Journal of Business Market Management, Free University Berlin, Marketing Department, vol. 9(1), pages 564-596.
    7. Naga Lakshmi Damaraju & Jay B. Barney & Anil K. Makhija, 2015. "Real options in divestment alternatives," Strategic Management Journal, Wiley Blackwell, vol. 36(5), pages 728-744, May.
    8. Daniel, Francis & Lohrke, Franz T. & Fornaciari, Charles J. & Turner, R. Jr., 2004. "Slack resources and firm performance: a meta-analysis," Journal of Business Research, Elsevier, vol. 57(6), pages 565-574, June.
    9. Philipp Meyer‐Doyle & Sunkee Lee & Constance E. Helfat, 2019. "Disentangling the microfoundations of acquisition behavior and performance," Strategic Management Journal, Wiley Blackwell, vol. 40(11), pages 1733-1756, November.
    10. Shun-Jen Hsueh & Hsin-Hong Kang, 2007. "Cointegration relationships of strategy variables among firms within strategic groups," Asia Pacific Journal of Management, Springer, vol. 24(1), pages 61-73, March.
    11. Tai-Young Kim & Jeroen G. Kuilman, 2013. "The Demography of Resources," Journal of Management Studies, Wiley Blackwell, vol. 50(7), pages 1155-1184, November.
    12. Pierre-Xavier Meschi & Emmanuel Métais, 2007. "Expérience, oubli organisationnel et motifs de désinvestissement des acquisitions internationales:le cas des acquisitions françaises aux États-Unis (1988-2004)," Revue Finance Contrôle Stratégie, revues.org, vol. 10(4), pages 73-109, December.
    13. Shige Makino & Christine M. Chan, 2017. "Skew and heavy-tail effects on firm performance," Strategic Management Journal, Wiley Blackwell, vol. 38(8), pages 1721-1740, August.
    14. Sandri, Serena & Schade, Christian & Mußhoff, Oliver & Odening, Martin, 2010. "Holding on for too long? An experimental study on inertia in entrepreneurs' and non-entrepreneurs' disinvestment choices," Journal of Economic Behavior & Organization, Elsevier, vol. 76(1), pages 30-44, October.
    15. Sea‐Jin Chang & Yoichi Matsumoto, 2022. "Dynamic resource redeployment in global semiconductor firms," Strategic Management Journal, Wiley Blackwell, vol. 43(2), pages 237-265, February.
    16. Giovanni. Gavetti & Daniel A. Levinthal, 2004. "50th Anniversay Article: The Strategy Field from the Perspective of Management Science: Divergent Strands and Possible Integration," Management Science, INFORMS, vol. 50(10), pages 1309-1318, October.
    17. Chris Starmer, 1999. "Cycling with Rules of Thumb: An Experimental Test for a new form of Non-Transitive Behaviour," Theory and Decision, Springer, vol. 46(2), pages 139-157, April.
    18. Woike, Jan K. & Hoffrage, Ulrich & Petty, Jeffrey S., 2015. "Picking profitable investments: The success of equal weighting in simulated venture capitalist decision making," Journal of Business Research, Elsevier, vol. 68(8), pages 1705-1716.
    19. Weiß, Christian, 2010. "The Ownership Concentration of Firms: Three Essays on the Determinants and Effects," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 30247, October.
    20. Buehler Stefan & Kaiser Christian & Jaeger Franz, 2005. "Competition Policy and Exit Rates: Evidence from Switzerland," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-30, November.

    More about this item

    Keywords

    Intended rationality; segment exit; signal; SI ventures; uncertainty;
    All these keywords.

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:ausman:v:41:y:2016:i:2:p:398-421. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.agsm.edu.au .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.