This research explores a dual-track divestiture and the challenges of the subsequent organizational separation process. Based on a single case study of failed equity carve-out followed by a spin-off in the automotive industry, it identifies two salient dimensions of the organizational separation process, i.e., legitimacy and autonomy. The study shows that both legitimacy toward external stakeholders and autonomy toward a former corporate parent firm are necessary for a divested unit to operate independently in the post-divestiture period. However, both are not achieved at once but develop over time in different sequences. The process requires the spun-off to manage paradoxical requirements throughout the different steps of the separation cycle: 1) detaching from while preserving relationships with its former corporate parent during the organizational separation period, 2) conforming to while being distinctive from its former corporate parent during the new venture establishment period, and 3) collaborating while competing with its corporate parent during the future strategic orientation period. The theoretical contribution lies in exploring the previously unobserved dual-track divestiture phenomenon and the role of those various dependencies between the divester and divested entity in the organizational separation process.
