Resource Redeployment and Divestiture as Strategic Alternatives

Emilie R. Feldman, Arkadiy V. Sakhartov

Research output: Contribution to journalArticlepeer-review


What should the managers of a multibusiness firm do when their company's resources are not used profitably? Research on redeployment proposes that managers should withdraw those resources from the business where they are underutilized and switch them to a business where they can be used more profitably, whereas the literature on divestiture advocates that managers should divest the business containing those resources. In this study, we investigate the factors that lead managers to choose resource redeployment over divestiture as a mode of exit and vice versa. Using a formal model, we establish that the two exit modes act as intertemporal substitutes, whereby redeployment dominates for earlier exits but divestiture dominates for later exits. Although both redeployment and divestiture are inversely related to their implementation costs, redeployment costs amplify the effect of divestiture costs on the likelihood of exit, and divestiture costs amplify the effect of redeployment costs on the likelihood of exit. Finally, we derive a series of results that show that disregarding one of these two exit options as a strategic alternative to the other may lead to misspecifications of empirical models that seek to predict the likelihood of redeployment, divestiture, or exit. Overall, our work contributes to the corporate strategy literature by uniting two streams of research that have largely remained disparate, yet whose insights have significant implications for each other.

Original languageEnglish (US)
Pages (from-to)926-945
Number of pages20
JournalOrganization Science
Issue number3
StatePublished - 2022


  • business exit
  • corporate strategy
  • divestitures
  • formal model
  • real options
  • resource redeployment

ASJC Scopus subject areas

  • Strategy and Management
  • Organizational Behavior and Human Resource Management
  • Management of Technology and Innovation


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