The Value of Resource Redeployability in the Face of Committed Rivals

Abstract

The ability of multi-business firms to redeploy resources across businesses is a principal source of corporate advantage, as evidenced by a plethora of theoretical and empirical research. However, extant theory is silent in clarifying how resource redeployability might impact competitive behavior of rivals. Redeployability reduces irreversible commitments, which have long been recognized to deter rivalry, allow privileged access to scarce resources, and sustain a valuable strategic position. This raises a tension between the flexibility advantages and potential commitment disadvantages of redeployability. Using a dynamic computational model, we explore the competitive conditions under which redeployability can be advantageous or detrimental to long-term value. In addition to enhancing our understanding of the boundary conditions around the value of resource redeployability, this study also has implications for real option models and the broader dynamic capabilities literature.