We examine whether organizations vicariously learn from near-failures and failures of others. We propose that the impact of such failure-related experience depends on the geographic market and industry origin of the experience. Our findings indicate that the local failure-related experience of both banks and thrifts have higher survival-enhancing learning value for banks than nonlocal experience, supporting the value of accessibility and applicability for useful learning. Bank near-failure experience had more value than bank failure experience, but thrift failure and near-failure experience had equivalent impact, suggesting that the learning impact of types of failure-related experience varies with its industry origin.
We draw upon theories of organizational learning to examine acquisition likelihood in a sample of banking industry acquisitions from 1988 through 2001. Although research on organizational learning suggests that routines arising both from experience and from performance feedback guide organizational learning, the combined effect of these two sources of learning has rarely been examined. Findings are consistent with our theoretical predictions: (1) prior acquisition experience, (2) recent acquisition performance, and (3) the interaction between acquisition experience and recent acquisition performance are all positively related to the likelihood of subsequent acquisition.
Research on performance aspirations has tended to assume that historical and social aspirations work in parallel and influence strategic behavior in a similar manner. We posit that these two distinct modes of performance comparison in fact lead to dissimilar firm behavior. We also explore how variability in prior acquisition performance influences the relationship between aspiration levels and subsequent strategic behavior. We examine our questions in the context of mergers and acquisitions within the US commercial banking industry from 1988-2005. Consistent with our prediction, we find that firms' acquisition behavior varies significantly depending on whether historical or social comparisons are used. We also find that high variability in the previous acquisition performance of the firm intensifies the relationship between acquisition performance relative to aspirations and the probability of the firm making acquisitions below historical and social aspirations, but attenuates the relationship above such aspirations.
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