Firm performance, rent appropriation, and the strategic resource divestment capability

Abstract

Dynamic capabilities manifest the organizational capacity to purposefully create or modify the firm's resource base. In this paper, we consider resource divestment an important firm-level resource management capability that manifests a two-step organizational change routine. Firms must first be motivated to engage in resource divestment, and then decide which resources should be ‘sold off.’ In exploring this firm-level capability, we employ factor market theory to consider the ‘seller side’ of the market, and provide a useful framework for conceptualizing how firms generate competitive advantage through resource divestment. We test our model of the resource divestment capability with a dataset of professional baseball franchises during the period 1969–83. Copyright © 2007 John Wiley & Sons, Ltd.