We examine the impact of diversification on performance for firms operating in different institutional environments during a relatively stable period and during a major economy‐wide shock. We locate our study in six Asian countries at different levels of institutional development. Results indicate that diversification negatively impacts performance in more developed institutional environments while improving performance only in the least developed environments. Even in the least developed institutional environments, diversification offers limited benefits when an economy‐wide shock strikes. Though successful diversifiers are sometimes affiliated with business groups, diversification is associated with poorer performance for both affiliated firms and independent firms. In sum, we find that the outcomes of diversification are influenced by institutional environments, economic stability and affiliation with business groups. Copyright © 2007 John Wiley & Sons, Ltd.

Valuable resources often exist at distant points from a firm's current locations, so that strategic decisions such as growth have a spatial dimension in which firms seek information and choose between geographically distributed alternatives. Studies show that geographic proximity facilitates the flow of resources, but there is limited understanding of factors that exacerbate or ease the impact of geographic distance when firms seek new resources. This paper argues that the difficulty of search increases with distance, particularly when search involves greater information processing, but that firms can partially overcome the constraints of distance with direct, contextual, and vicarious learning. We study 2070 domestic acquisition announcements by U.S. chemical manufacturers founded after 1979. The results demonstrate the persistent effect of spatial geography on organizational search processes.

Acquisitions often do not reach completion when buyers' initial evaluations change during post-announcement due diligence investigations, but research offers only limited explanations for when such deal-cancelling new information will be most common. Drawing from the spatial geography and acquisition strategy literatures, we argue that successful completion of acquisitions can be partially explained by their spatial characteristics. We start by predicting that geographic distance has a particularly strong impact in reducing the likelihood of completing related acquisitions; we then identify contingencies based on multiple forms of direct, contextual, and vicarious experience that can help acquirers overcome the constraints of distance. We test the arguments with a sample of 1,603 domestic acquisitions announced by 724 U.S. chemical manufacturing firms between 1980 and 2004.

Studies suggest that firms navigating an economic shock can adapt and improve performance by targeting perceived growth opportunities. A puzzle, however, is that an economic shock increases environmental uncertainty and therefore the risk associated with growth reconfiguration. This study finds that growth reduced performance and increased the risk of firm failure during the Asian economic shock of 1997. Growing firms differed in the extent to which they were able to mitigate the constraints imposed by the shock. However, the presence of developed external institutions played a more systematic role in their adaptation than did organizational resources represented by financial slack or product diversification. The deliberate attempt to reconfigure augmented the adverse effect of the economic shock on firm performance and survival.

Asset reconfiguration by both growth and divestiture underlies business transformation, but reconfiguration remains poorly understood in countries with limited market infrastructure. We argue that more developed infrastructure facilitates resource reconfiguration, assisting weak firms' attempts to retrench and strong firms' attempts to grow; in turn, market development shapes the impact of reconfiguration by enhancing the benefits of adding assets and limiting the benefits of divestitures. We examine reconfiguration activity by 1,256 firms based in eight South East Asian economies-Hong Kong, Indonesia, Korea, Malaysia, the Philippines, Singapore, Taiwan, and Thailand-from 1990 to 1999 INTRODUCTIONAsset reconfiguration is an important means of resource development for firms throughout the world. Studies of business dynamics have demonstrated that reconfiguring resources via modes such as acquisitions, alliances, internal development, and divestiture influences firm performance (Capron, 1999; Mitchell, 2000, 2004;Moliterno and Wiersema, 2007). The studies show that the motivation to reconfigure a firm's resource base can come from two sources: financial distress, where struggling firms face pressure to reconfigure resources in attempts to increase their operating efficiency (Bibeault, 1982;Robbins and Pearce, 1992), and financial strength, where strong firms reconfigure resources to improve their competitive position (Hopkins, 1991;Montgomery and Thomas, 1988;Koza, Tallman, and Ataay, 2011). In addition to such firm-level sources, studies of international business and institutional environments have argued that the extent of market development strongly affects business strategy and performance (Nelson, 1995;Hoskisson et al., 2000;Cuervo-Cazurra and Dau, 2009). To date, though, studies of asset reconfiguration primarily focus on firms operating in countries with well-developed market infrastructure, without considering how market development itself affects the extent to which firms are able to undertake different forms of resource reconfiguration and how Keywords: growth; acquisitions; divestiture; asset reconfiguration; institutional environment *Correspondence to: Will Mitchell, Duke University, The Fuqua School of Business, 1 Towerview Dr., Durham, NC 27708, U.S.A. E-mail: willm@duke.edu Global Strategy JournalGlobal Strat. J., 1: 6-26 (2011) Published online in Wiley Online Library (wileyonlinelibrary.com). DOI: 10.1111DOI: 10. /j.2042DOI: 10. -5805.2011 Copyright © 2011 Strategic Management Society reconfiguration, in turn, affects firm performance in different environments. This study argues that stronger market-oriented institutions facilitate resource reconfiguration, helping weak firms retrench and strong firms grow; in turn, market development enhances the benefits of adding assets, but limits the benefits of divesting assets.We frame the study by drawing on studies of asset reconfiguration, especially the resource-based and dynamic capabilities theories of business strategy (Helfat et al., 2007;Penrose, ...