Three Essays on Firm Learning and Performance in the Context of Corporate Divestiture

The question of whether and how firms learn continues to fuel debate amongst strategic management scholars. Within its answer lies the potential for identifying and capitalizing upon valuable drivers of firm performance advantage. In this dissertation, I take aim at this question by investigating the viability and efficacy of three different learning processes in the context of corporate divestiture. This approach not only permits a comprehensive examination of firm learning, but also affords the opportunity to advance our understanding of a heretofore understudied, but important, mode of corporate development. Using a combination of publicly-available datasets and hand-collected data, I construct a large sample of cross-industry and cross-border divestitures originating from U.S.-headquartered firms during a twenty-six year period. From this platform, I consider whether and how firms may learn through 1) direct experience accumulation, 2) internal experience transfer, and 3) external experience transfer. In the first case, by developing six process-based performance measures that closely track the unfolding of the divestiture process, I find that the firm’s own divestiture experience acts as a double-edged sword, both augmenting and impairing different aspects of divestiture performance. In the second, I consider activity-to-activity learning transfer, and examine if experience gained in a firm’s execution of acquisitions is transferable to its execution of divestitures. Not only do I find that a firm’s learning how to acquire can directly impact its divestiture performance, I find that a firm’s learning how to acquire influences its ability to learn from its own direct divestiture experience. In the third case, I consider experience transfer across firm boundaries, specifically by examining divestiture experience sourced from the investment bankers and buyers engaged in the firm’s divestitures. I find that this external experience can not only play an outsize role in firm divestiture performance, but that it often impedes it. Taken together, these findings contribute new insights towards answering the question of whether and how firms learn