Selection Processes: Firms Versus Capabilities
- Topics:
- Efficiency,
- Small Business
- Tags:
- Business Operations,
- Capability,
- Corporate Law,
- Finance,
- Investment,
- Mergers & Acquisitions,
- Sales,
- Sales Force Management,
- Selection
- Source:
- Drexel University
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Overview: Evolutionary theory studies selection processes by which organizational entities exit environments that they do not fit, but most work has underemphasized the distinction between selection of firms and selection of their underlying capabilities. This paper argues that the extent of organizational capabilities that struggling firms possess affects the type of selection process they face when they exit an industry. Dissolution represents selection of the entire firm, including its underlying capabilities. In contrast, acquisition represents selection of only the corporate entity, while representing adaptation at the capability level through the preservation of potentially valuable capabilities. Acquirers have incentives to acquire failing firms that possess potentially valuable capabilities because these firm-specific capabilities face market failures in discrete exchange.
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Format: PDF | Size: 209KB | Date: Jul 2006 | Pages: 33
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