Adapting for Innovation: Including Divestitures in the Debate

Existing literature argues that divested units are unwanted and poor performers – yet evidence suggests that companies do divest well performing units, and often retain a relationship with them, especially in the quest for innovation. This article presents an exploratory case study to examine how a company structures the divestiture of an innovative unit and how it can benefit from the innovation the unit generates. The analysis focuses on how an established company can use divestiture as a strategy to enhance the innovation of its units, and capture its value, by structuring, maintaining and nurturing a special relationship with the unbundled unit. Under new organizational arrangement, resources can be transferred from the parent to the unit, while the parent retains access to the innovation developed within the unit. This study proposes a framework that offers corporate change agents and strategists a new perspective on how to integrate innovation and corporate strategy.