Organizational Forgetting in Divestment: Senior Moment or Stimulus for Post-Divestment Performance?

Applying the lens of organizational learning, we investigate the role of organizational forgetting in divestments. We propose that forgetting moderates the relationship between divestment and postdivestment performance. Specifically, we infer positive impacts for firms with low levels of accidental forgetting while firms with high levels experience negative impacts. Likewise, we infer positive impacts for high levels of purposeful forgetting while firms with low levels face negative impacts. We argue that purposeful forgetting fosters to free up resources that can be leveraged for creating additional organizational knowledge. Hence, forgetting antecedes new organizational learning and enables firms to do new things or existing things better with the newly configured portfolio. Ultimately, this leads to increased post-divestment performance. We use an organizational forgetting model to analyze the relationship.