The impact of modes of entry and resource fit on modes of exit by multibusiness firms

Abstract

This study examines the choices of modes of entry and exit in the process of new business exploration. We find that exit mode choices ave determined by a different set of factors from those that are important for the entry mode decision and the exit decision per se. Our study indicates that when the resource profiles of a parent firm and the business unit are more dissimilar, and there has been less development of firm-specific idiosyncratic assets, firms are more likely to sell businesses than dissolve them. Further, the study reports a strong relationship between the mode of exit from a line of business (sell-off vs, dissolution) and the original mode of entry (acquisition versus internal development). Copyright (C) 1999 John Wiley & Sons, Ltd.