infonet-economy

Divestitures have become an important topic on the agenda of many firms, especially during the recent economic downturn. Based upon psychological constructs of cognitions, emotions, and hope, this paper presents a framework to explain how managerial reluctance to divest might evolve in the formation of divestiture decisions and is likely to affect the timing of the divestiture. From this framework, a set of testable propositions is derived and discussed for future empirical research endeavours. The paper concludes that the timing of divestiture decisions can be improved by rationalizing the decision process through the definition of formal divestiture criteria and implementing processes to ensure that divestiture is routinely considered. Moreover, it is important to build managerial and organizational capabilities that recognize divestitures as an unavoidable strategic process to explore future growth opportunities rather than a managerial failure.