Resource relatedness, redeployability, and firm value

Arkadiy V. Sakhartov · Timothy Brian Folta

241 citations0/0 files storedStrategic Management Journal

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Abstract

Our paper elaborates the effects of resource relatedness on value of a multibusiness firm. We emphasize that value results from interplay of benefits of synergy and redeployability. This view, considering how synergy and redeployability interact in determining value, extends prior separate considerations of the two benefits. We also diagnose that the value effect of resource relatedness is contingent on uncertainty and specify this contingent relationship. We use the real option valuation approach and formally evaluate the impacts of the two effects of relatedness. This explication enables us to demonstrate how redeployability contributes to value beyond synergy, and how they contribute in tandem. In this sense, we illuminate previously undiagnosed value in multibusiness firms. Beyond theoretical implications, our results have important empirical and managerial implications . Copyright © 2013 John Wiley & Sons, Ltd.

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References

1973The Pricing of Options and Corporate Liabilities 1970The Market for "Lemons": Quality Uncertainty and the Market Mechanism 1994Investment under Uncertainty 1979Option pricing: A simplified approach 1979Martingales and arbitrage in multiperiod securities markets 1962Strategy and Structure: Chapters in the History of the American Industrial Enterprise 1995Diversification's effect on firm value 1976The valuation of options for alternative stochastic processes

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2016Entry, exit, and the potential for resource redeployment 2021Strategy and Uncertainty: Resource-Based View, Strategy-Creation View, and the Hybrid Between Them 2017Managing complexity in a multi-business-model organization 2018Strategic responses to shocks: Comparative adjustment costs, transaction costs, and opportunity costs 2017Redirecting Research Efforts on the Diversification–Performance Linkage: The Search for Synergy 2014

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