Divestitures, Value Creation, and Corporate Scope

Abstract

This paper exposes the relatively limited understanding we have of divestitures as a tool for corporate renewal. I argue that divestitures can be used by managers to generate slack in non-scale free resources, particularly managerial capacity, which are needed to support corporate renewal. I provide a review of the literature, using it to highlight the need for future research. In particular, this is a call for us to gain a better understanding of the drivers and consequences of divestitures and the different ways in which they can be implemented; moreover, this is a call to consider how divestitures are used either in combination or sequentially with other governance modes that affect corporate scope and can lead to corporate renewal, namely build, borrow, buy decisions.