Work

Pacing and path dependence: how strategic consistency in capital reallocation shapes firm performance

Year: 2025

Type: article

Abstract: While capital reallocation is essential for maintaining competitiveness, it presents a dilemma: large-scale changes disrupt existing routines and harm performance. Prior research has focused on the level of reallocation, overlooking how its effects are conditioned by a firm’s historical context. To shed light on this dilemma, We examine how the performance impact of capital reallocation depends not only on its pace (discontinuous vs. incremental) but also on a path-dependent mechanism: consistency with past strategies. Analyzing Japanese panel data, we find that discontinuous (large-scale) reallocation harms performance more than incremental (small-scale) reallocation. Critically, this relationship is strongly contingent on a firm’s past patterns: the negative impact is mitigated for firms with a history of discontinuous change, whereas performance suffers most when organizations accustomed to incremental change reallocate discontinuously. Our study introduces strategic consistency as a new channel in reallocation research and empirically suggests that dynamic capabilities are cultivated within organizational history and inertia.

Source: Journal of Business Research

DOI: 10.1016/j.jbusres.2025.115894

Author: Tomoki Hayata

Institution: Kobe University

Language: English

Topic: Innovation and Knowledge Management

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $4,440

Funder: Japan Science and Technology Agency