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What a cool paper!

Gibt es zum Start auch einen Satz Ralph Lauren Polohemden, @annagoeddeke.bsky.social? 🤔🤨

@kingsbschool.bsky.social @kingscollegelondon.bsky.social @jbs.cam.ac.uk #CambridgeUniversity #NUSBusinessSchool #NationalUniversityofSingapore @strategicmgmt.bsky.social @aomstr.bsky.social @aomconnect.bsky.social #STRsky

#ResourceAllocation #CapitalAllocation #ResourceRedeployment #StrategicRenewal #Change #Diversification #CorporateHQ #InformationProcessing

Thank you to my co-authors Yasemin Kor and Kulwant Singh for the wonderful teamwork on this study.

Do feel free to message me if you have any questions or comments!

This, in turn, allows these complex firms to reduce their inertia disadvantages.

Finally, we also have some good news for firms with high unrelated diversification: Our results show that having market entry experience and maintaining organizational slack can reduce their information processing challenges relative to less diversified firms.

This finding suggests that even though cash flows of units may be uncorrelated under unrelated diversification, this unrelatedness is also cognitively taxing for the HQ, which leads to information complexity and HQ detachment, and in turn reduces a firm’s changes in resource allocation.

However, our results show that there is a negative effect of #unrelated diversification—while we don’t find any significant effect of #related diversification.

This result also challenges previous assumptions that there are greater resource allocation adjustments under #unrelated diversification. Because under unrelated diversification cash flows of the different units are uncorrelated, there should be more opportunities for reallocating resources.

To test this prediction, we analyzed 340 diversified U.S. firms over approximately 20 years and found that #inertia indeed rises sharply with unrelated diversification. Hence, our results suggest that these firms miss out on valuable opportunities for changing what they currently do.

These factors weaken their ability to use internal information appropriately, increasing the risk that they undervalue important external trends, thereby increasing inertia.

In addition, HQs in such complex firms frequently find themselves detached from the local conditions of their different business units.