Inaugurated in 2007, the prize is awarded annually to a relatively young or new scholar, who displays exemplary scholarship that promises to have an impact on future strategic management practice.
Emilie Feldman is Associate Professor (with Tenure) at the Wharton School of Management, University of Pennsylvania, and is the winner of the 2017 Emerging Scholar Award for the Strategic Management Society.
Emilie is best known for work on an important but under-studied phenomenon: corporate divestitures. Within corporate strategy, there is a large literature on acquisitions, highlighting their economic logic and implementation challenges. Divestitures represent approximately one third of overall deal activity, and yet they receive very little research attention. Over the last eight years, Emilie has helped to redress the balance, through a number of careful empirical studies. For example, she shows how executives engage in divestitures in order to enhance the market value of their enterprise, even though the longer-run operating performance may be problematic, particularly when these divestitures were made by executives with shorter tenures.
In another study, Emilie shows how family-controlled enterprises appear to apply a much higher “hurdle” on the decision to divest than non-family controlled enterprises. In her work on “dual directors” (individuals who hold a board position in both the divested business and the divesting firm), Feldman explores some of the ongoing relationships between the enterprises. While directors are legally obliged to act in the best interest of the firm on whose board they serve, Feldman finds interesting evidence that the dual director situations advantage the “parent” firm at the expense of the spinoff.
In recent work, Emilie provides interesting insight as to the impact of divestitures on resource allocation both internal to the firm in its capital budgeting and in terms of subsequent acquisition activity.
In sum, Emilie Feldman has published nine papers in top-tier academic journals since gaining her PhD in 2010. The committee felt that her strong publication record, and her ability to address important strategy questions using rigorous statistical methods, made her a worthy winner of the Emerging Scholar Award.
The below is an interivew with Emilie Feldman and SMS Board Member Julian Birkinshaw.
I have always been fascinated by industrial organization economics, antitrust law, and mergers and acquisitions, so I knew that I would study something in the domain of corporate strategy when I entered the doctoral program at HBS. I came to realize that even though most mergers and acquisitions (M&A) involve one firm selling some or all of its businesses to another company, the academic literature had analyzed these deals far more intensively from the perspective of the buying firm than the selling firm. So, I saw an opportunity to make a contribution by studying the strategic management of divestitures and spinoffs (which are a specific mode of divestiture). I think the main reason why so few people are studying divestitures these days is that the conventional wisdom is that these deals are simply the reverse of M&A, and we already know a lot about M&A, so why bother studying divestitures? The relative imbalance in the research attention that is paid to M&A versus divestitures is very striking to me, not least because divestitures typically account for about 30-40% of overall corporate deal-making!
My current research interests are in three main areas. First, I am exploring how divestitures interact with other modes of corporate strategic activity, and more generally, how different modes of corporate strategy can have an effect on one another. Second, I am studying the organizational diseconomies that exist within multi-business firms, and how those influence corporate strategic decision-making. Third, I have become very interested in how external parties, such as consultants, bankers, lawyers, and the like can affect the corporate strategies and the performance of the companies that engage them.
A core finding that stands out to me across much of my research is how inertial divestitures appear to be, and how costly this can be for firms. One piece of evidence for this point is that family firms are far less likely than non-family firms to divest businesses, perhaps in part because of their financial and personal ties to their companies, even though the divestitures undertaken by family firms strongly outperform the divestitures undertaken by non-family firms (Feldman, Amit, and Villalonga, 2016). Another illustration of this point is that the stock market returns to activist-led divestitures exceed those of manager-led divestitures, a finding that may be linked to the fact that activist investors are free from the personal and organizational constraints that may limit managerial decision-making (Chen and Feldman, 2017). Even securities analysts and investors fall prey to inertia: companies that spin off their legacy businesses enjoy greater improvements in the quality of their analyst coverage and their stock market performance than companies that spin off non-legacy businesses, suggesting that historical connections strongly constrain the perceptions of stock market participants as well (Feldman, 2016).
I do two main things when translating my research into practical insights that executives running large corporations might find useful. The first is to discuss the factors that typically drive executives to undertake (or not to undertake) certain strategies. For example, under what circumstances does the academic literature say that a company is more or less likely to merge with another firm, or to divest a certain business, or to diversify its scope into unrelated areas? I find that this approach helps executives explore the decision-making processes that underpin their corporate strategies more carefully than they otherwise would. The second thing I do is to talk about the typical performance consequences of companies undertaking certain strategies (or not). This helps executives think through the likely implications of their strategies for the bottom line. Managers tend to really care about investor response, so I’ll often use short- or long-term stock market returns as a key performance metric.
My advice to younger faculty would be to balance focus and flexibility. Focus means zeroing in one or a few ideas, theories, or phenomena that you find intellectually stimulating (since you will spend a lot of time thinking about and working on them). Having a clear research identity is critical in our field, and focus promotes that. Flexibility means being able to consider alternate theoretical perspectives, methodologies, or phenomena. The most creative and impactful ideas often arise at the intersection of fields, so it’s important to keep your eyes open for those opportunities. My advice to PhD students would also be to invest in rigorous methods training. Having strong empirical chops pays dividends in the long-run, and it’s very difficult to pick this up after you finish your doctoral studies.
Criteria for Selection:
The criteria for this award recognizes a portfolio of work that suggests the candidate will make fundamental contributions to the way we think about knowledge essential to achieving durable organizational success. Especially considered are contributions that complement existing strategic management theory with ideas from the arts and sciences. Eligible to be nominated are members of the SMS. The likely winner of the award will:
The recipient of the SMS Emerging Scholar Award will be recognized at an appropriate, significant event at the SMS Annual Conference and receives prize money of US$ 5,000. In addition, the recipient to present their research in a prominent setting at the SMS Annual Conference and will recognized and featured in one of the SMS journals.
To nominate an individual, please provide the following:
*Nominations are accepted throughout the year. The deadline for this award is March 31st of each year.