The learning effect on business groups` subsequent foreign entry decisions into transitional economies

Abstract

Organizational learning theory has been extensively employed in many subfields of management studies. While scholars have demonstrated that international experience facilitates decisions on foreign direct investment, few studies have explored the influences of various experiences from multiple sources within and across organizational boundaries. Specifically, this study aims to examine how intra/inter-organizational experiences of internationalization affect the likelihood that a member firm in a business group will conduct subsequent FDI in a transitional economy and how managers weigh a variety of experiences that come from multiple sources at different levels. By analyzing the FDI data of Taiwanese electronics firms in China from 1993 to 2004, we confirm that both the experiences shared among peer subunits within a business group and the spillover experiences from industrial competitors and collaborators increase the likelihood that a focal firm will make subsequent investments in a transitional economy. However, when presented with various experiences, only country-specific experiences and the experiences of horizontal peer subunits within a business group maintain positive influences on focal firms` subsequent entry decisions. In contrast, managers tend to ignore international experiences that are dissipated at the industry level. The findings deepen the academic understanding of intra-and inter-organizational learning behavior regarding the international expansion of business groups.