Intended rationality in exit decisions: The organizational field of rivals as a source of signal in segment exit decisions by Korean SI ventures, 2000-2006

Abstract

This paper examines how the aggregated actions of rivals belonging to the same organizational field affect a firm's exits from existing market segments. We argue that while a firm's exit decisions are strongly influenced by the aggregated actions by other firms which may serve as an uncertainty-reducing signal, the focal firm's strategic responses to signals from the organizational field of rivals are more complicated, informed, and rational, than is usually suggested. For instance, in its evaluation of signals about segment attractiveness based on the aggregated actions of rivals, the focal firm will give different weights to rivals' actions according to the strength of competitive threat, will make refined inferences about the attractiveness of a segment based on the performances of rivals, and will give a greater weight to recent actions by rivals than to older ones. The results of our event history analysis of all segment exits by Korean SI ventures support all our hypotheses.