Prof. Anu Wadhwa wins a Best paper award

Abstract:

In this study, we examine the association between a firm’s venturing activities and its undertaking strategic renewal. Our study was motivated by some important gaps in the corporate entrepreneurship literature on venturing and renewal. There is limited understanding of the different types and dimensions of firms’ renewal activities. In particular, more understanding of discontinuous renewal, involving shifts in firms’ core businesses, is required. There has also been very little examination of conditions that drive firms to undertake strategic renewal. For example, it is not known how venturing increases or reduces the benefits of renewal that involves shifts away from core businesses. We focus on firms’ external venturing initiatives by examining CVC investments. We argue that CVC investments create growth options in new and existing businesses but these options do not result in firms’ withdrawal from existing businesses. Therefore, CVC activity is negatively associated with the likelihood of a firm undertaking discontinuous renewal. The benefits of withdrawing from existing businesses are even lower, and the costs even higher, for firms in dynamic industries that possess strong internal capabilities. We test our predictions using longitudinal data on 477 firms from the 1990 Fortune 500 list for the period 1990-2000. Our results imply that external venturing allows firms to avoid discontinuous renewal involving withdrawal from existing businesses into new and unfamiliar ones. Our results also have substantive implications for research into dynamic capabilities, and real options.

Auteurs: Sandip Basu, California State U. East Bay, Anu Wadhwa, EPFL

Mots-clés:

Real options , Strategic Renewal , External venturing