Innovating by eliminating: Technological resource divestiture and firms' innovation performance

Abstract

While much of the prior research focused on the acquisition and accumulation aspect of technological resources, this study turns attention to a firm's decision to divest its technological resources. It is important to continuously rearrange and reevaluate existing resources and make room for the additional acquisition through divestiture. This study mainly assumes technological resource divestitures as a proactive strategy rather than a result of upper level decision. This work expects that divestiture leads firms to enhance innovation performance. Suggesting newly coined concept, technological resource divestiture, this study examines the direct effect of resource divestiture on firms' innovation in the technological domain. Moreover, this study scrutinizes the influence of the rhythm of divestiture and diversity of divesting technological dimension on innovation. It is conducted with data on patent expirations before the maximum granted duration and sell-offs in pharmaceutical industry provided by USPTO.