Strategic transition

Abstract

There are few theories explaining how firms can persist through large‐scale changes. Extending Penrose's maxim that the firm can continue to grow or exist by exiting unprofitable markets and entering higher‐growth areas, we explicate a theory of how firm resources affect the success of this transformational phenomenon, which we call strategic transition. We propose that resource redeployability, relatedness of industries, and slack resources enable firms to transform themselves such that they operate in an entirely new domain. Furthermore, we point to the equifinality of strategic transition and produce a typology of the paths firms may take to achieve it.Key Points We extend Penrose's maxim that the firm can continue to grow or exist by exiting unprofitable markets and entering higher‐growth areas. We explicate a theory of how firm resources affect this transformational phenomenon, which we call strategic transition. We propose that resource redeployability, the relatedness between the old and new industry, and slack resources affect the ability of firms to transform themselves such that they operate in an entirely new domain. We also illustrate to the equifinality of strategic transition and produce a typology of the paths firms may take to achieve it.

Dynamic resource management and slack resources

“…In summary, the results show, as the resource orchestration approach points out, that managers manage resources differently and that these differences have an impact on value creation and performance (Helfat et al ., 2009; Sirmon et al ., 2011). Therefore, firms should strategically manage these resources to achieve superior performance (Mallon and Lanivich, 2023; Martin and Cuypers, 2024), in particular when facing an external jolt (Conz et al ., 2023; Du et al ., 2022).…”

“…, 1998), it being necessary to pursue a combination of slack resources to maximise the level of competitiveness of the business (Dolmans et al. , 2014) or even a reallocation of these resources allowing the pursued objectives to be achieved (Helfat and Peteraf, 2003), being able to facilitate a strategic transition (Mallon and Lanivich, 2023). These processes are assimilable to those proposed by resource management approaches (Helfat et al.…”

“…In this sense, the works of Sirmon et al (2007), Helfat et al (2009), Sirmon et al (2011) or Lavie (2012) constitute the different proposals for the development of the RBV that contemplate the necessary modification of resource stocks (Dierickx and Cool, 1989) and their effect, not only individually but also in combination, on business profitability (D'Oria et al, 2021;Hitt et al, 2021). Therefore, the mere possession of resources is a necessary, but not sufficient, condition to achieve competitive advantage, and it is necessary to understand the processes through which these resources are used to assess their effect on performance (Kraaijenbrink et al, 2010;Mallon and Lanivich, 2023;Conz et al, 2023) according to environmental conditions (Martin and Cuypers, 2024). Barney (1991) claimed that firms need to use their strategic resources to achieve a competitive advantage.…”

“…, 2009; Sirmon et al. , 2007), managers structure, combine and leverage the slack resources of their businesses to create value or ensure the survival of the business (Conz et al ., 2023; Mallon and Lanivich, 2023). Managers will make different orchestration decisions that will lead to different resource management strategies.…”

“…The findings of this study provide important implications for practice. First, the finding suggests resource coordination is important in leveraging value from slack resources against environmental jolts (Conz et al ., 2023; Mallon and Lanivich, 2023). Thus, beyond previous studies that indicated performance could be affected by keeping slack resources, we propose that managers need to carefully orchestrate these resources in the pursuit of competitive advantage.…”