Rent appropriation and behavioral antecedents of strategic resource divestment

The resource based view of the firm (RBV) argues that the firm's portfolio of resources provides the basis for competitive advantage. Accordingly, a firm-level decision to divest of resource capacity is a strategically significant organizational change event-and one that entails risk-but empirical research has not considered why firms undertake such risky change to the resource portfolio. We draw on the Behavioral Theory of the Firm (BTF) to examine this question. The analysis presented here employs insights from the BTF and tests theoretical propositions of the RBV in examining the effect of prior firm performance and strategic factor market characteristics on the firm's divestment of productive asset capacity during periods of strategic reconfiguration. In particular, we find that prior firm performance and the ability to appropriate rents are related to the amount and type of resource divestment the firm undertakes. Empirical research on resource divestment has been sparse, largely owing to the difficulty in tracking and measuring resources across firms and over time. This paper overcomes this research design challenge by using a population-level dataset of professional baseball franchises to study the divestment of strategic player resources. Findings from this study show the value of studying determinants to resource decisions and argue for reintroduction of the BTF into the RBV.