Arkadiy Sakhartov

Arkadiy Sakhartov
  • Assistant Professor of Management

Contact Information

  • office Address:

    2017 SH-DH
    Philadelphia, PA 19104

Research Interests: corporate change, corporate diversification, economies of scope, real options, resource allocation

Links: CV

Overview

Education

PhD, Management, Krannert Graduate School of Management, Purdue University, 2012.
Master of Science in World Economy, Russian Foriegn Trade Academy, Russia, Moscow, 1999.
BS Mechanical Engineering, South Ural State University, Russia, Chelyabinsk, 1995.

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Research

  • Arkadiy Sakhartov (2017), Stock market undervaluation of resource redeployability, Strategic Management Journal.

    Abstract: Research Summary: Stock market undervaluation of resources was often assumed to have strategic implications. Such undervaluation lets firms buy resources relatively cheaply, but it can also constrain resource deployment. This article shows that the option to redeploy a firm's resources to a new business can be undervalued in stock markets when investors face ambiguity about that option due to uniqueness of redeployment. The developed formal model derives conditions under which stock markets undervalue resources. Those conditions are summarized with an empirical operationalization that can be tested with a broad range of strategic implications. Besides, the model provides a more complete account of resource redeployability by demonstrating the redeployability paradox. The paradox highlights that some determinants of redeployability enhance undervaluation, while simultaneously increasing objective value of redeployable resources. Managerial Summary: Stock markets can systematically undervalue resources. On the one hand, such undervaluation creates a profitable opportunity for a firm that needs some resources for its growth and compares the option to buy stock in another firm, whose resource are undervalued, with the option to build those resources internally. On the other hand, such undervaluation poses limits to resource deployment strategies of the undervalued firm. When does such undervaluation occur? This study highlights one possible source for undervaluation, ambiguity that is faced by stock market investors about the option to redeploy a firm's resources to a new business. The study specifies conditions under which stock markets are more likely to undervalue resources. The understanding of those conditions can guide managers toward strategic opportunities.

  • Arkadiy Sakhartov (2017), Economies of scope, relatedness, and the dynamics of corporate diversification, Strategic Management Journal, Volume 38 (Issue 11), pp. 2168-2188.

    Abstract: Research summary: The dominant view has been that businesses that are more related to each other are more often combined within diversified firms. This study uses a dynamic model to demonstrate that, with inter-temporal economies of scope, diversified firms are more likely to combine moderately related businesses than the most-related businesses. That effect occurs because strong relatedness reduces redeployment costs and makes firms redeploy all resources to better performing businesses. The strength of that effect depends on inducements for redeployment measured as the current return advantage of one business over another business, volatilities of business returns, and correlation of those returns. This study develops hypotheses for those relationships and suggests empirical operationalizations, encouraging empiricists to retest the implications of relatedness for the dynamics of corporate diversification. Managerial summary: It is believed that diversified firms are more likely to combine more-related businesses because relatedness enables sharing of resources between businesses. Indeed, a firm can apply knowledge created in one business to another business, avoiding costly duplication in knowledge development. Resource sharing also adds value when a firm offers several products, adding the convenience of one-stop shopping and charging higher prices. However, resource sharing is not the only motivation for corporate diversification. In environments where profitability of businesses changes frequently, firms diversify by redeploying part of resources from an underperforming business to a better performing business. This study uses a dynamic model to demonstrate that, with that second motivation for corporate diversification, firms end up combining moderately related businesses rather than the most-related businesses.

  • Arkadiy Sakhartov (Working), Risk implications of allocation of corporate resources.

    Abstract: This study scrutinizes the risk implications of allocation of corporate resources to multiple businesses. Existing research generated conflicting predictions about whether corporate diversification reduces risk and about whether corporate risk and corporate value form a positive or a negative relationship. The study uses the simulation method to overcome the challenges of informal reasoning in the complex research setting. The model demonstrates that corporate diversification can increase risk under certain conditions and identifies those conditions. The study also proves that there is no simple risk-return relationship previously searched by researchers. The new results improve the conceptual understanding of the risk implications of allocation of corporate resources and lay the groundwork for a better empirical identification of those effects.

  • Arkadiy Sakhartov (Working), Selecting corporate structure for diversified firms.

    Abstract: The present study scrutinizes the implications of corporate structure for performance of diversified firms. The benchmark for the scrutiny is the set of the extant conflicting predictions about the optimal choice of two features of corporate structure, centralization of resource allocation and incentives offered to unit managers. The study uses the valuation model to overcome challenges of informal reasoning in the complex context of resource reallocation. The model disentangles the existing conflicting predictions, identifies the boundary conditions for each prediction, and reestablishes the complex interactions between corporate structure and relatedness. The new results lay the groundwork for a better empirical identification of the effects of relatedness and corporate structure on corporate value, often tested in corporate diversification research.

  • Arkadiy Sakhartov (Work In Progress), When should corporate managers strive to strategize?.

    Abstract: The study examines the conditions demanding corporate managers to strategize, rather than satisfice, in undertaking corporate change. The enquiry builds off Herbert Simon’s notion of bounded rationality suggesting that managers are intendedly rational even if only limitedly so. To derive the conditions inviting strategizing, the study develops a model simulating two heuristics for corporate change. With the first heuristic  based on the behavioral theory of the firm (Cyert and March, 1963), a firm satisfices and the corporate change is driven by the problemistic search initiated by the attainment discrepancy between the firm's performance and aspirations. With the second heuristic, the firm strategizes and changes in the corporate scope are explained based on resource redeployability (Sakhartov and Folta, 2015) realized when the firm optimally switches its resources from an underperforming business to another better performing business. The study derives the corporate value underrealized in changing the corporatye scope based on the first heuristic and relates that loss in value to the features of the corporate context considered by managers.The model suggests that some systematic relationships exist between the value underrealized in changing the corporate scope based on aspirations and the features of the corporate context. The results may be used to guide mangers on when it is particularly worthwhile to try strategizing in changing the scope of their firms.

  • Arkadiy Sakhartov and Timothy B. Folta (2015), Getting beyond relatedness as a driver of corporate value, Strategic Management Journal.

    Abstract: Our paper scrutinizes how corporate value derives from redeployability of firms’ resources to new product markets. We focus on the underexplored determinant of redeployability, inducements, defined as advantages in returns in new over existing markets. We assemble separate dimensions of inducements from research on corporate diversification and real options and consider inducements in their entirety. A simulation model casts redeployability as a real option to switch the use of resources across markets and explicates important interdependences among the dimensions of inducements. The model also demonstrates that inducements modify the effect of relatedness on corporate value. Our theoretical arguments amend existing theory and have important implications for corporate diversification research.

  • Timothy B. Folta and Arkadiy Sakhartov, Hedging strategies. In The Palgrave Encyclopedia of Strategic Management, edited by David Teece and Mie Augier, (2014)

  • Arkadiy Sakhartov and Timothy B. Folta (2013), Resource relatedness, redeployability, and firm value, Strategic Management Journal, 35 (12).

    Abstract: Our paper elaborates the effects of resource relatedness on value of a multibusiness firm. We emphasize that value results from interplay of benefits of synergy and redeployability. This view, considering how synergy and redeployability interact in determining value, extends prior separate considerations of the two benefits. We also diagnose that the value effect of resource relatedness is contingent on uncertainty and specify this contingent relationship. We use the real option valuation approach and formally evaluate the impacts of the two effects of relatedness. This explication enables us to demonstrate how redeployability contributes to value beyond synergy, and how they contribute in tandem. In this sense, we illuminate previously undiagnosed value in multibusiness firms. Beyond theoretical implications, our results have important empirical and managerial implications.

  • Arkadiy Sakhartov and Timothy B. Folta (2012), Rationalizing organizational change: A need for comparative testing, Organization Science, 24 (4), pp. 1140-1156.

    Abstract: Behavioral theory explains that organizational change is prompted by performance relative to a firm-specific aspiration. Although this explanation has been empirically confirmed, it has not been tested comparatively alongside other explanations, most notably rational choice. This lack of comparative study implies that prior research may be committing Type I errors—confirming aspiration-level decision making when it is not actually occurring. This paper contributes to behavioral theory in two specific ways. First, we show that several foundational studies purporting to provide empirical support for aspiration-level decision making may actually represent maximizing behavior. To consider this potential, we simulate a sample of subjectively rational agents who choose strategies by maximizing expectations. We show that it is possible and highly probable to diagnose satisficing when agents are, in fact, maximizing. Second, we develop and implement recommendations for comparative testing to demonstrate reliability. Analysis shows that the recommendations are effective at reducing Type I and II errors for both behavioral theory and rational choice. This paper is meant to inspire the design of future studies on aspirations and, indeed, all studies of organizational change.

Teaching

Current Courses

  • MGMT249 - Mergers & Acquisitions

    This course explores the role of mergers and acquisitions and alternative methods of corporate development in advancing the strategies of operating business. Emphasis is on the way companies use acquisitions to alter business mixes; seize opportunities in new products, technologies and markets; enhance competitive positioning; adjust to changing economics, and promote value-creating growth. Although the course will emphasize strategic acquisitions, it also will explore leveraged buy-outs and hostile financial acquisitions as well as their influence on corporate buyers. Please note that you must fulfill the prerequisites in order to enroll in this class.

    MGMT249001 ( Syllabus )

  • MGMT721 - Corp Dev: Merg & Acquis

    This course explores the role of mergers and acquisitions and alternative methods of corporate development in advancing the strategies of operating business. Emphasis is on the way companies use acquisitions to alter business mixes; seize opportunities in new products, technologies and markets; enhance competitive positioning; adjust to changing economics, and promote value-creating growth. Although the course will emphasize strategic acquisitions, it also will explore leveraged buy-outs and hostile financial acquisitions as well as their influence on corporate buyers. Please note that you must fulfil the prerequisites in order to enroll in this class.

    MGMT721001 ( Syllabus )

    MGMT721002 ( Syllabus )

Past Courses

  • MGMT249 - MERGERS & ACQUISITIONS

    This course explores the role of mergers and acquisitions and alternative methods of corporate development in advancing the strategies of operating business. Emphasis is on the way companies use acquisitions to alter business mixes; seize opportunities in new products, technologies and markets; enhance competitive positioning; adjust to changing economics, and promote value-creating growth. Although the course will emphasize strategic acquisitions, it also will explore leveraged buy-outs and hostile financial acquisitions as well as their influence on corporate buyers. Please note that you must fulfill the prerequisites in order to enroll in this class.

  • MGMT701 - STRAT & COMPET ADVANTAGE

    This course is concerned with strategy issues at the business unit level. Its focus is on the question of how firms can create and sustain a competitive advantage. A central part of the course deals with concepts that have been developed around the notions of complementarities and fit. Other topics covered in the course include the creation of competitive advantage through commitment, competitor analysis, different organizational responses to environmental changes, modularity, and increasing returns. An important feature of the course is a term-length project in which groups of students work on firm analyses that require the application of the course concepts.

  • MGMT721 - CORP DEV: MERG & ACQUIS

    This course explores the role of mergers and acquisitions and alternative methods of corporate development in advancing the strategies of operating business. Emphasis is on the way companies use acquisitions to alter business mixes; seize opportunities in new products, technologies and markets; enhance competitive positioning; adjust to changing economics, and promote value-creating growth. Although the course will emphasize strategic acquisitions, it also will explore leveraged buy-outs and hostile financial acquisitions as well as their influence on corporate buyers. Please note that you must fulfil the prerequisites in order to enroll in this class.

Awards and Honors

  • Outstanding Strategic Management Journal Editorial Board Member, 2017
  • Dean’s Office Ph.D. Student Service Award, Krannert School of Management, Purdue University, 2012
  • Certificate for Distinguished Teaching, Krannert School of Management, Purdue University, 2010

In the News

Activity

In the News

Growth vs. Profits: Uber’s Cash Burn Dilemma

Can global ride-hailing startup Uber slow its rate of cash burn before losses start to threaten the company’s viability?

Knowledge @ Wharton - 2017/01/24
All News

Awards and Honors

Outstanding Strategic Management Journal Editorial Board Member 2017
All Awards