Abstract
This paper extends research on experiential learning of foreign subsidiaries by exploring the temporal conditions under which a foreign subsidiary can benefit from the experience of its sister subsidiaries. Building upon organizational evolution and learning literature, we propose that differences in entry timing among sister subsidiaries provide structural conditions that bound the opportunities for inter-subsidiary learning. We argue that different entry cohorts of sister subsidiaries are beneficial to a focal subsidiary, as they provide non-redundant, complementary experience from their different operational stages, and ignite the motivation to learn. Our empirical analysis of Japanese foreign subsidiaries provides strong evidence that survival is enhanced by the experience of different entry cohorts of sister subsidiaries, but not by that of similar cohorts. Qualitative evidence also shows that multiple channels of experience exchange across sister subsidiaries lead to actual learning. We further show that the survival benefit derived from different cohorts is contingent on the level of environmental change, as well as on the level of experience of the focal subsidiary and its parent firm. Our research highlights the importance of temporal heterogeneity in the internationalization process, and offers implications for the temporal strategy of multinational companies.
Similar content being viewed by others
Notes
With regard to the scope of a parent firm's sister subsidiary in measuring its experience, we used geographic region as a main specification. We used this regional specification because Japanese MNCs are typically organized along geographic regions within which sister subsidiaries engage in region-wide interactions. From our interviews, we found that sister subsidiaries have opportunities to interact frequently with each other within regional boundaries (as opposed to across boundaries) in Japanese MNCs. As we mentioned in the empirical analyses, we checked the sensitivity of the scope specification by using alternative specifications such as host country and industry.
Our empirical analysis focuses on a foreign subsidiary's exit as a critical outcome driven by cohort-specific experience. Subsidiary exit has been examined as a critical outcome in the literature on international business (Delios & Beamish, 2001; Li, 1995; Shaver et al., 1997). In particular, we follow the lead of the “survival-enhancing learning” argument (Baum & Ingram, 1998), which explicitly emphasizes the collective importance of internal and external benefits (and costs) from interorganizational experience sharing as a determinant of the ultimate organizational outcome. In a similar vein, our study aims to bring to light the collective significance of cohort-specific experience that can influence a foreign subsidiary's fate.
Among different entry modes, JVs with local partners can access knowledge about local markets from their local partners, and thus can show different patterns of learning opportunities. Unfortunately, a lack of detailed information on local partners prevented us from exploring this direction of research. As another sensitivity check, we performed our analyses by excluding these JVs with a local partner, as we assumed they may have fundamentally different patterns of learning. This analysis provided virtually the same findings as what we report here.
In the country specification, one issue is to consider the geographic proximity between sister subsidiaries as a weight in constructing their experience. For example, US subsidiaries can be dispersed in very different locations. While we do not have data on the within-country location of subsidiaries for all countries, we performed an experimental analysis of the US sample with which we constructed the experience measure to reflect the approximate geographic distance between the state locations of sister subsidiaries. In calculating sister subsidiaries’ experiences, we adjusted them by assigning weights ranging from 0.5 to 1 (0.5 being the most distant cases, such as Washington State and Florida, and 1 being the most proximate cases, such as within the same state). In this experiment we found that the results did not change even if we used the weighted measures of experience. We suspect that sister subsidiaries of a parent firm are usually dispersed (rather than concentrated in one state), so that geographic proximity did not provide significant variations in the measure.
One general criticism can be that our findings are derived from unobserved factors such as the level of innovativeness of the subsidiary. To the extent to which the data are obtainable, we tried our best to control for these factors, including subsidiary- and parent-level variables that can be relevant to subsidiary exit. For example, parent firm’s R&D intensity can capture part of firm-level innovation capability. The baseline hazard rate – which is specific to each stratum of a subsidiary’s industry, country, and year – can also account for much of the variation in innovativeness. Nonetheless, owing to a lack of data availability, we acknowledge the possibility that subsidiary-level unobserved factors such as innovativeness can influence the results.
References
Andersen, O. 1993. On the internationalization process of firms: A critical analysis. Journal of International Business Studies, 24 (2): 209–231.
Argote, L. 1999. Organizational learning: Creating, retaining and transferring knowledge. Norwell, MA: Kluwer Academic Publishers.
Barkema, H. G., Bell, J. H. J., & Pennings, J. M. 1996. Foreign entry, cultural barriers, and learning. Strategic Management Journal, 17 (2): 151–166.
Barron, D. N., West, E., & Hannan, M. T. 1994. A time to grow and a time to die: Growth and mortality of credit unions in New York City, 1914–1990. American Journal of Sociology, 100 (2): 381–421.
Bartlett, C. A., & Yoshihara, H. 1988. New challenges for Japanese multinationals: Is organization adaptation their Achilles heel? Human Resource Management, 27 (1): 19–43.
Baum, J. A. C., & Ingram, P. 1998. Survival-enhancing learning in the Manhattan hotel industry, 1898–1980. Management Science, 44 (7): 996–1016.
Beamish, P. W., Delios, A., & Lecraw, D. J. 1997. Japanese multinationals in the global economy. Cheltenham: Edward Elgar.
Beckman, C. M., & Haunschild, P. R. 2002. Network learning: The effects of partners’ heterogeneity of experience on corporate acquisitions. Administrative Science Quarterly, 47 (1): 92–124.
Belsley, D., Kuh, E., & Welsch, R. 1980. Regression diagnostics: Identifying influential data and sources of collinearity. New York: John Wiley & Sons.
Chang, S.-J. 1995. International expansion strategy of Japanese firms: Capabilities building through sequential entry. Academy of Management Journal, 38 (2): 383–407.
Chang, S.-J., & Rhee, J. H. 2011. Rapid FDI expansion and firm performance. Journal of International Business Studies, 42 (8): 979–994.
Ciabuschi, F., Forsgren, M., & Martín, O. S. 2011. Rationality vs ignorance: The role of MNE headquarters in subsidiaries’ innovation processes. Journal of International Business Studies, 42 (7): 958–970.
Cohen, W. M., & Levinthal, D. A. 1990. Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly, 35 (1): 128–152.
Cox, D. R. 1972. Regression models and life-tables (with discussion). Journal of the Royal Statistical Society, 34 (2): 187–220.
Cronbach, L. J. 1987. Statistical tests for moderator variables: Flaws in analyses recently proposed. Psychological Bulletin, 102 (3): 414–417.
Cyert, R. M., & March, J. C. 1963. A behavioral theory of the firm. Englewood Cliffs, NJ: Prentice-Hall.
Darr, E. D., Argote, L., & Epple, D. 1995. The acquisition, transfer, and depreciation of knowledge in service organizations: Productivity in franchises. Management Science, 41 (11): 1750–1762.
Delios, A. 2011. Experience and a firm’s performance in foreign markets: A commentary essay. Journal of Business Research, 64 (2): 227–229.
Delios, A., & Beamish, P. W. 1999. Geographic scope, product diversification, and the corporate performance of Japanese firms. Strategic Management Journal, 20 (8): 711–727.
Delios, A., & Beamish, P. W. 2001. Survival and profitability: The roles of experience and intangible assets in foreign subsidiary performance. Academy of Management Journal, 44 (5): 1028–1038.
Dellestrand, H., & Kappen, P. 2012. The effects of spatial and contextual factors on headquarters resource allocation to MNE subsidiaries. Journal of International Business Studies, 43 (3): 219–243.
Desai, V. 2010. Learning to learn from failures: The impact of operating experience on railroad accident responses. Industrial and Corporate Change, advance online publication March 26, doi:10.1093/icc/dtq019.
Dierickx, I., & Cool, K. 1989. Asset stock accumulation and the sustainability of competitive advantage. Management Science, 35 (12): 1504–1513.
Dikova, D., & van Witteloostuijn, A. 2007. Foreign direct investment mode choice: Entry and establishment modes in transition economies. Journal of International Business Studies, 38 (6): 1013–1033.
Eriksson, K., Johanson, J., Majkgard, A., & Sharma, D. D. 1997. Experiential knowledge and costs in the internationalization process. Journal of International Business Studies, 28 (2): 337–360.
Freeman, J., Carroll, G. R., & Hannan, M. T. 1983. The liability of newness: Age dependence in organizational death rates. American Sociological Review, 48 (5): 692–710.
Galbraith, J. 2000. Designing the global corporation. San Francisco: Jossey-Bass.
Gaur, A. S., & Lu, J. 2007. Ownership strategies and survival of foreign subsidiaries: Impacts of institutional distance and experience. Journal of Management, 33 (1): 84–110.
Ghoshal, S., & Bartlett, C. A. 1988. Creation, adoption, and diffusion of innovations by subsidiaries of multinational corporations. Journal of International Business Studies, 19 (3): 365–388.
Ghoshal, S., & Bartlett, C. A. 1990. The multinational corporation as an interorganizational network. Academy of Management Review, 15 (4): 603–625.
Ghoshal, S., Korine, H., & Szulanski, G. 1994. Inter-unit communication in multinational corporations. Management Science, 40 (1): 96–110.
Gu, Q., & Lu, J. W. 2011. Effects of inward investment on outward investment: The venture capital industry worldwide 1985–2007. Journal of International Business Studies, 42 (9): 263–284.
Gupta, A. K., & Govindarajan, V. 2000. Knowledge flows within multinational corporations. Strategic Management Journal, 21 (4): 473–496.
Hannan, M. T. 1998. Rethinking age dependence in organizational mortality: Logical formalizations. American Journal of Sociology, 104 (1): 126–164.
Hannan, M. T. 2005. Ecologies of organizations: Diversity and identity. Journal of Economics Perspectives, 19 (1): 51–70.
Hannan, M. T., & Freeman, J. 1984. Structural inertia and organizational change. American Sociological Review, 49 (2): 149–164.
Hannan, M. T., Pólos, L., & Carroll, G. R. 2004. The evolution of inertia. Industrial and Corporate Change, 13 (1): 213–242.
Hansen, M. T. 1999. The search-transfer problem: The role of weak ties in sharing knowledge across organization subunits. Administrative Science Quarterly, 44 (1): 82–111.
Hedlund, G. 2005. Assumptions of hierarchy and heterarchy, with applications to the management of the multinational corporation. In S. Ghoshal & D. E. Westney (Eds), Organization theory and the multinational corporation, (2nd edn): 198–221. New York: Palgrave Macmillan.
Henisz, W., & Delios, A. 2001. Uncertainty, imitation and plant location: Japanese multinational corporations, 1990–1996. Administrative Science Quarterly, 46 (3): 443–475.
Huber, G. P. 1991. Organizational learning: The contributing processes and the literatures. Organization Science, 2 (1): 88–115.
Ingram, P. 2002. Interorganizational learning. In J. A. C. Baum (Ed), Companion to organizations: 642–663. Oxford: Blackwell.
Ingram, P., & Baum, J. A. C. 1997a. Chain affiliation and the failure of Manhattan hotels, 1898–1980. Administrative Science Quarterly, 42 (1): 68–102.
Ingram, P., & Baum, J. A. C. 1997b. Opportunity and constraint: Organizations’ learning from the operating and competitive experience of industries. Strategic Management Journal, 18 (Summer special issue): 75–98.
Inkpen, A. C. 2000. Learning through joint ventures: A framework of knowledge acquisition. Journal of Management Studies, 37 (7): 1019–1044.
Jansen, J., Van den Bosch, F., & Volberda, H. 2006. Exploratory innovation, exploitative innovation, and performance: Effects of organizational antecedents and environmental moderators. Management Science, 52 (11): 1661–1674.
Johanson, J., & Vahlne, J.-E. 1977. The internationalization process of the firm: A model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 8 (1): 23–32.
Johanson, J., & Vahlne, J.-E. 2009. The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership. Journal of International Business Studies, 40 (9): 1411–1431.
Kim, T., & Rhee, M. 2009. Exploration and exploitation: Internal variety and environmental dynamism. Strategic Organization, 7 (1): 11–41.
Kor, Y. Y., & Mahoney, T. 2004. Edith Penrose’s (1959) contributions to the resource-based view of strategic management. Journal of Management Studies, 41 (1): 183–191.
Lane, P. J., & Lubatkin, M. 1998. Relative absorptive capacity and interorganizational learning. Strategic Management Journal, 9 (5): 461–477.
Lavie, D. 2006. The competitive advantage of interconnected firms: An extension of the resource-based view. Academy of Management Review, 31 (3): 638–658.
Levin, D. Z. 2000. Organizational learning and the transfer of knowledge: An investigation of quality improvement. Organization Science, 11 (6): 630–647.
Levitt, B., & March, J. G. 1988. Organizational learning. Annual Review of Sociology, 14: 319–340.
Li, J. 1995. Foreign entry and survival: Effects of strategic choices on performance in international markets. Strategic Management Journal, 16 (5): 333–351.
Lu, J. W., & Beamish, P. W. 2004. International diversification and firm performance: The S-curve hypothesis. Academy of Management Journal, 47 (4): 598–609.
Makino, S., & Beamish, P. W. 1998. Performance and survival of joint ventures with non-conventional ownership structures. Journal of International Business Studies, 29 (4): 797–818.
March, J. G. 1991. Exploration and exploitation in organizational learning. Organization Science, 2 (1): 71–87.
Martinez, J. I., & Jarillo, C. J. 1989. The evolution of research on coordination mechanisms in multinational corporations. Journal of International Business Studies, 20 (3): 489–514.
Miner, A. S., & Haunschild, P. R. 1995. Population level learning. In L. L. Cummings & B. M. Staw (Eds), Research in organizational behavior, Vol. 17: 115–166. Greenwich, CT: JAI Press.
Nelson, R. R., & Winter, S. G. 1982. An evolutionary theory of economic change. Cambridge, MA: Belknap Press of Harvard University.
Oldroyd, J. B., & Gulati, R. 2010. A learning perspective on intraorganizational knowledge spill-ins. Strategic Entrepreneurship Journal, 4 (4): 356–372.
Penrose, E. T. 1959. The theory of the growth of the firm. New York: John Wiley.
Rajan, R., & Zingales, L. 1998. Financial dependence and growth. American Economics Review, 88 (3): 559–586.
Ranger-Moore, J. 1997. Bigger may be better, but is older wiser? Organizational age and size in the New York life insurance industry. American Sociological Review, 62 (6): 903–920.
Rhee, M., Kim, Y., & Han, J. 2006. Confidence in imitation: Niche-width strategy in the UK automobile industry. Management Science, 52 (4): 501–513.
Rosenkopf, L., & Almeida, P. 2003. Overcoming local search through alliances and mobility. Management Science, 49 (6): 751–766.
Shaver, J., Mitchell, W., & Yeung, B. 1997. The effect of own-firm and other-firm experience on foreign direct investment survival in the United States, 1987–92. Strategic Management Journal, 18 (10): 811–824.
Shenkar, O., & Li, J. 1999. Knowledge search in international cooperative ventures. Organization Science, 10 (2): 134–143.
Sidhu, J. S., Volberda, H. W., & Commandeur, H. R. 2004. Exploring exploration orientation and its determinants: Some empirical evidence. Journal of Management Studies, 41 (6): 913–932.
Song, J. 2002. Firm capabilities and technology ladders: Sequential foreign direct investments of Japanese electronics firms in East Asia. Strategic Management Journal, 23 (3): 191–210.
Sørensen, J. B., & Stuart, T. E. 2000. Aging, obsolescence, and organizational innovation. Administrative Science Quarterly, 45 (1): 81–112.
Staw, B. M. 1981. The escalation of commitment to a course of action. Academy of Management Review, 6 (4): 577–587.
Stinchcombe, A. L. 1965. Social structure and organizations. In J. C. March (Ed), Handbook of organizations: 142–193. Chicago, IL: Rand McNally.
Szulanski, G. 1996. Exploring internal stickiness: Impediments to the transfer of best practice within the firm. Strategic Management Journal, 17 (Winter special issue): 27–43.
UNCTAD. 2001. World investment report 2001: Promoting linkages. Geneva: United Nations Conference on Trade and Development.
Vermeulen, F., & Barkema, H. 2002. Pace, rhythm, and scope: Process dependence in building a profitable multinational corporation. Strategic Management Journal, 23 (7): 637–653.
Welch, L. S., & Luostarinen, R. 1988. The internationalization process and networks: A strategic management perspective. Journal of International Marketing, 4 (3): 11–28.
Winter, S. G. 2000. The satisficing principle in capability learning. Strategic Management Journal, 21 (10/11): 981–996.
Winter, S. G. 2003. Understanding dynamic capabilities. Strategic Management Journal, 24 (10): 991–995.
Wu, W., & Lin, C. 2010. Experience, environment, and subsidiary performance in high-tech MNEs. Journal of Business Research, 63 (12): 1301–1309.
**a, J., Kimberly, B., & Delios, A. 2009. When experience meets national institutional environmental change: Foreign entry attempts of U.S. firms in the Central and Eastern European region. Strategic Management Journal, 30 (12): 1286–1309.
Zaheer, S. 1995. Overcoming the liability of foreignness. Academy of Management Journal, 38 (2): 341–363.
Zollo, M., & Winter, S. G. 2002. Deliberate learning and the evolution of dynamic capabilities. Organization Science, 13 (3): 339–351.
Acknowledgements
The authors thank Ulf Andersson and three anonymous reviewers for their invaluable feedback. We truly appreciate the cooperation of senior managers who shared their experience in our field interviews. We are also grateful to Jun Ito, Toshimitsu Ueta, Hu Tianyou, Gregory Dunn and Mary Ryan for their research assistance. This research was supported by the National University of Singapore Research Grants R-313-000-074-112/133 to Young-Choon Kim and R-313-000-088-112 to Jane W. Lu, and the National Research Foundation of Korea Grant funded by the Korean Government (NRF-2010–330-B00100) to Mooweon Rhee.
Author information
Authors and Affiliations
Corresponding author
Additional information
Accepted by Ulf Andersson, Area Editor, 11 June 2012. This paper has been with the authors for three revisions.
Rights and permissions
About this article
Cite this article
Kim, YC., Lu, J. & Rhee, M. Learning from age difference: Interorganizational learning and survival in Japanese foreign subsidiaries. J Int Bus Stud 43, 719–745 (2012). https://doi.org/10.1057/jibs.2012.19
Received:
Revised:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1057/jibs.2012.19