How to assess the corporate parenting strategy? A conceptual answer

Abstract

Purpose

The major purpose of this paper is the development of a theoretical framework that can be used by corporate practitioners to understand the implicit parenting strategy of their company, assess its performance, and adjust it for improving the net corporate value creation.

Design/methodology/approach

In this paper, a three‐dimensional framework is developed that accounts for corporate‐to‐business and business‐to‐business interactions, value‐adding and value‐destroying activities, and strategic and operational levers. The framework is operationalized by assigning a broad set of individual activities to these levers.

Findings

The paper delivers a robust, systematic, and operational framework to assess the net benefits to a given business of being part of a corporate portfolio, and to identify and evaluate implicit parenting strategies in corporate practice. While previous studies mainly focused on broad parenting approaches with low granularity this framework now allows earlier observations to be substantiated, finer distinctions between the applied strategies to be drawn, and the core of superior value added approaches to be investigated.

Practical implications

The introduced framework can be used to analyze the origin and underlying drivers of conglomerate discounts and premia and thus enhance understanding of capital market valuation of multi‐business companies. The developed framework can also be the basis for the derivation of a typology of corporate parenting strategies. In this way, it can support practitioners in portfolio management – which was also the explicit motivation for the development of the original parenting advantage concept.

Originality/value

The outlined framework will facilitate the investigation of structural, strategic, and organizational roots of superior parenting strategies in corporate practice. It may be used to analyze performance differences of multi‐business companies that go beyond the degree of diversification and may finally contribute to solving the puzzle of the conglomerate discount.

Citation

Kruehler, M., Pidun, U. and Rubner, H. (2012), "How to assess the corporate parenting strategy? A conceptual answer", Journal of Business Strategy, Vol. 33 No. 4, pp. 4-17. https://doi.org/10.1108/02756661211242663