Investigations into redeployability of corporate resources
Abstract
A central theme in corporate strategy is that firm value is enhanced when managers have discretion to deploy a firm's resources in more than one market. Two ways in which having such discretion creates value have been specified in the literature. First, firms can contemporaneously share resources across multiple markets, thereby gaining economies of scope, or synergy. Second, firms can exploit redeployability – managerial discretion to withdraw firm resources from one market and reallocate them to another market over time. While contemporaneous sharing has received wide attention in corporate strategy literature, understanding of implications of redeployability remains limited. The present thesis offers five complementary essays that illuminate the underexplored implications of redeployability. The five essays contribute to understanding of corporate strategy in a number of ways. The first essay qualitatively examines cases of two companies deploying their resources in multiple industries and marshaling those industries. It provides a better understanding of distinct managerial considerations involved in contemporaneous sharing and redeployability. The second essay complements qualitative insights from the first essay with a formal model disentangling contemporaneous sharing and redeployability and scrutinizing how such benefits separately and jointly contribute to firm value. The third essay further elaborates upon the value effect of redeployability by relaxing a prevalent, yet untested, assumption that the most related markets have both the lowest switching costs and the highest inducements for redeployment. The introduced formal model illustrates the extent to which the existing view of redeployability fails to recognize the value of redeploying resources to a less related market having higher inducements. The model in the third essay also quantifies the bias in predicting value of redeployability while ignoring its path dependent quality. The fourth essay considers an additional critical factor associated with redeployability and formally models mispricing of redeployable resources by outsiders. Such an analysis highlights a paradox associated with redeployability – even though redeployability provides valuable flexibility, firms may not be able to capitalize on such flexibility because they cannot attain the capital to exercise deployment options. Finally, the fifth essay formally reexamines the key topic of why some firms persistently combine multiple businesses in their scope. I explain such persistence in multiple businesses based on resource redeployability and, thus, complement the existing explanation based on contemporaneous sharing.
Degree
Ph.D.
Advisors
Folta, Purdue University.
Subject Area
Management
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