The Impact of Prior Ties with External Organizations On Corporate Divestitures (WITHDRAWN)

Drawing from the relational governance and relative absorptive capacity literatures, our study examines conditions under which prior ties between divesting firms and their investment banks enable firms to learn from their past experience and achieve good divestiture outcomes. We theorize and find that the transaction value of divestitures is higher when there are more prior ties between the investment bank and the client firm, when the shared prior experience between the two firms is relevant to the current situation, and when the client firm has a more exclusive relationship with the investment bank. Further, we find that the effect of relevant joint experience on transaction value is positively moderated by the presence of financial trouble for the divesting firm; i.e., relevance of experience has a stronger impact on transaction value when the divesting firm is motivated to draw upon and apply the learning and advice from past transactions that it has built up through the shared experience with its investment bank. This research provides important insights into the role of dyadic learning on the transaction outcomes of divesting firms.