The Evolution of Corporate Divestment

When compared to other fields of research such as mergers and acquisitions, corporate divestment is under researched. There are at least three main reasons for this: the environment in which corporate divestment research has taken place has caused divestments to be understood as acquisition-driven rather than strategy-driven, the scope and distinct modes of divestment, and the difficulties in isolating the divestment phenomena. The objective of this chapter is to review the main theoretical approaches used in the study of divestment, to analyze their contribution to the field, and to discuss whether new approaches are needed in divestment research. Most studies of divestment are based on the concept that divestment is the outcome of poor unit performance, and the reversal of previous over-diversification and growth strategies that expanded the company size beyond optimal control. This chapter proposes four future lines of research into corporate divestment: the international business strategy, the network perspective, the stakeholders' perspective, and the institutional theory.