Matthias Brauer

What Have We Acquired and What Should We Acquire in Divestiture Research? A Review and Research Agenda:

In strategic management research, divestitures have mostly been treated as side aspects or mirror images of even broader phenomena such as corporate restructuring or mergers and acquisitions. The current article “unbundles” portfolio restructuring research by carving out the insights that have been generated on the specific industry and firm-level determinants of divestitures, the financial and organizational implications of divestitures, as well as the divestiture process since the 1980s. Through the consolidation of the dispersed knowledge on divestitures, its critical analysis, and the outline of novel avenues for future research, the article aims to reenergize divestiture research in management science.

Defining the strategic role of boards and measuring boards' effectiveness in strategy implementation

Purpose – The purpose of this research is to explore the potential role and the measurement of the effectiveness of boards of directors in strategy formulation and implementation – two aspects that have so far been left largely unaddressed by corporate governance research and practice.Design/methodology/approach – Based on insights from strategy process literature, the paper suggests that, by ensuring consistency between resource allocation processes and the firms intended strategy, boards could fulfil a meaningful role in strategy implementation. The proposed outside‐in analysis of resource allocation decisions is illustrated by a single case study of a major Swiss pharmaceutical company.Findings – The proposed approach enables corporate governance scholars to look at how boards fulfil their role in strategy implementation from a perspective similar to that of financial analysts. It might thus be suited to complement existing methods in empirical corporate governance research.Practical implications – Th...

Corporate and Divisional Manager Involvement in Divestitures – A Contingent Analysis

In prior research, insights into the degree and type of corporate and divisional level manager involvement in divestiture processes have remained sparse. Based on extant empirical research on managerial processes in divestitures and a review of literature on the antecedents of divestitures, this paper identifies a set of internal and external contingencies which potentially influence the degree of corporate and divisional level manager involvement in divestitures. Findings from an in-depth case study of four parallel divestitures by a major European technology company (TechCo) in the late 1990s indicate which of these contingencies seem to have a relevant influence on the involvement of the different managerial levels in divestiture processes. The contingent approach contributes to theory by providing explanations for existing, conflicting empirical evidence concerning the degree and type of corporate and divisional level manager involvement in divestiture processes. The second major theoretical contribution of the paper lies in the identification and description of the type of managerial actions these different contingencies bring about.

Firm performance and aspiration levels as determinants of a firm’s strategic repositioning within strategic group structures

Previous studies on strategic group dynamics have generated valuable insights into the industry-level determinants of changes in strategic group membership and group strategy. Complementary to this line of research, the present study focuses on the firm-level determinants underlying shifts in firm positioning within strategic group structures. Drawing on the behavioral theory of the firm, the study examines the influence of firm performance and performance aspirations on the extent to which firms strategically diverge from or converge towards their strategic groups. Empirical results from a longitudinal analysis of the strategic repositioning by 1191 US insurance firms over a 10-year time period (1999–2008) suggest that firms performing below aspirations show a greater inclination to diverge from their current strategic group than firms performing above aspirations. Industry conditions are found to moderate the relationship between performance aspirations and strategic divergence–convergence. The study’s findings highlight the influence of performance feedback on strategic group dynamics, and the importance of considering the interplay between firm-level and industry-level characteristics in explaining strategic group dynamics.

Workforce Downsizing and Firm Performance: An Organizational Routine Perspective

While there is an extensive body of work on how organizational routines emerge and evolve over time, there is a scarcity of research on what happens when routines are disrupted or disbanded through the elimination of key individuals involved in them. This study is the first to theorize and empirically examine the relationship between the magnitude of workforce downsizing and firm performance applying an organizational routine perspective. Consistent with prior research on organizational routines, we posit that small-scale downsizing leads to efficiency improvements without disrupting the existing routines. While larger routine disruptions occur in both medium- and large-scale downsizing, we further argue and find that large-scale downsizing tends to be more beneficial than medium-scale downsizing. Building on prior research on routines, we reason that in medium-scale downsizing employees try to salvage the impaired, partially functioning routines, while large-scale downsizing requires a more fundamental rethinking and re-creation of routines leading to more positive outcomes. Our study contributes to downsizing research through the application of the organizational routine perspective to explain the financial outcomes of downsizing. In doing so, we depart from the widely held assumption in the downsizing literature that the relationship between the magnitude of downsizing and firm performance is linear. Our study also extends prior research on organizational routines by highlighting the usefulness of conceiving routines as mindful accomplishments where the pressure to engage in path-breaking cognitive effort may lead to better results than path-dependent repairing of routines.

The effects of short-term and long-term oriented managerial behavior on medium-term financial performance: longitudinal evidence from Europe

Short-term orientation aimed at maximizing quarterly results at the expense of long-term corporate performance and survival has become severely criticized. In the face of continuously decreasing chief executive officer (CEO) tenure, CEOs, however, seem to have few incentives to embrace long-term oriented behaviour. Instead, the question of foremost importance to self-interested CEOs is whether short-term orientation already harms financial performance in the three to four years of their own tenure, and whether CEOs stand a chance of benefiting from long-term orientation while still in office. CEOs thus face an intriguing ethical dilemma between optimizing their financial pay-off within their own tenure and securing the longer-term well-being of the corporation, its employees, and other major stakeholders. Consequently, our longitudinal study focuses on the medium-term performance implications of short-term and long-term orientation in Europes largest publicly listed companies. Results indicate that short-term orientation negatively impacts on medium term performance while long-term oriented behavior is positively associated with corporate performance in the medium term. Our findings advance managerial myopia theory, and provide insights into one of the most central ethical dilemmas faced by corporate executives today.

Performance Effects of Corporate Divestiture Programs

Even though acquisitions have generally taken a much more prominent place in strategic management research, divestitures have attracted more and more research attention recently (Brauer, 2006; Johnson, 1996). The term divestiture stands for a group of vehicles through which a firm adjusts its ownership structure and reduces its business portfolio scope. The most prominent vehicles which are commonly captured under the umbrella term divestiture are sell-offs, spin-offs or equity carveouts. Over the past few decades, scholars have contributed considerably to our knowledge of the antecedents of divestitures and offered further insights into divestiture performance (Berger & Ofek, 1999; Bergh & Lim, 2008; Haynes, Thompson, & Wright, 2002, 2003; Hite, Owers, & Rogers, 1987; John & Ofek, 1995; Lang, Poulsen, & Stulz, 1995; Montgomery, Thomas, & Kamath, 1984). But still, many ambiguities and gaps remain in our understanding of divestitures.

Sell-Offs and Firm Performance: A Matter of Experience?

Drawing on organizational learning theory, this article examines the moderating influences of different forms of internal and external sell-off experience on the relationship between firm sell-off activity and subsequent firm accounting performance. The results from a longitudinal analysis of sell-off activity by 293 European companies over a 15-year period (1995-2009) are consistent with basic predictions from learning theory, suggesting a positive moderating influence of a firm’s general sell-off experience. Yet, by distinguishing between multiple forms of learning (i.e., experiential, superstitious, interfirm, and vicarious learning), we further argue and find that the composition of a firm’s general sell-off experience is of substantial importance. Specifically, we find that learning benefits result from the repeated sale of related assets, whereas high levels of experience heterogeneity negatively affect the relationship between firm sell-off activity and subsequent firm performance. Furthermore, external sell-off experience by advisors and by industry peers is found to positively influence the divestiture–firm performance linkage. Collectively, these findings contribute to organizational learning theory and extend prior research on divestiture performance.

Analyzing analyst research : a review of past coverage and recommendations for future research

As visible and knowledgeable experts who constantly collect, analyze, and disseminate information about the future prospects of publicly listed firms, financial analysts fulfill an important information brokerage and monitoring function for investors. By providing investment advice, financial analysts also influence the demand for a firm’s stock and thus its price. Executives pay close attention to financial analysts’ earnings forecasts and recommendations, so much so that they are frequently criticized for excessive focus on their forecasts at the expense of the long-term interests of the firm. But while research on analysts in strategic management is steadily growing, we lack a coherent understanding of the extent and nature of analysts’ diverse influences on executives’ and investors’ decision making and the context in which analysts operate. This is largely due to the fragmentation of the literature and the absence of prior reviews or meta-analyses of the topic. By organizing, synthesizing, and analyzing extant research efforts on analysts in the various domains of strategic management research, we aim to advance our knowledge on the influence of analysts on firms and investors. Further, we hope that our analyses and recommendations help further increase research coverage on this important organizational stakeholder.

Schafft unsere Konzernebene einen Mehrwert? Ein Plädoyer für eine verantwortungsvolle Diversifikation

Der Kapitalmarkt schatzt sie nicht besonders, die diversifizierten Konzerne bzw. Unternehmensgruppen. Derartige „Mehr-Geschafts-Unternehmen“ (MGU) werden oft als „Wertvernichter“ gesehen und mit einem „Konglomeratsabschlag“ versehen. Auch „Synergien“, als wichtiges Gestaltungselement der Konzerne, sind zum Unwort geworden. Meist seien sie nur ein Hirngespinst wirklichkeitsfremder Manager. Daher sei eine Fokussierung des Portfolios grundsatzlich zu bevorzugen und wurde Wertsteigerungen ermoglichen. Wer sich gegen diese „Einsichten“ stellt, wird uber Konglomeratsabschlage auf den Aktienkurs abgestraft. Doch wird dieses Pauschalurteil der Sache gerecht? Wir vertreten in diesem Beitrag die Auffassung, dass die Diversifikation nach wie vor eine sehr wichtige strategische Option darstellt, die es sorgfaltig gegenuber einer Fokussierung abzuwagen gilt. Es gibt neben den wertvernichtenden diversifizierten Unternehmensgruppen durchaus auch eine stattliche Anzahl von MGUs, die nachhaltig profitabler sind als ihre fokussierten Vergleichsunternehmen. Doch diese Option verlangt die Fahigkeit der Fuhrungsmannschaft zum Management der Diversifikation.