Experience of emerging market firms: The role of cognitive bias in developed market entry and survival

Abstract

and Key Results■ This paper draws on organizational learning theory to explain how experience influences the propensity for emerging market firms (using an event history analysis of a sample of Latin American firms during the 1990s) to enter developed markets, and their likelihood of survival. ■ We argue that developed market experience is positively related to emerging market firms' entry and survival in developed markets; however, cognitive biases affect the roles played by other types of experience in entry decisions. ■ Alliance experience with developed market firms increases the likelihood of entry, but decreases the likelihood of survival. Failure experience in developed markets reduces the likelihood of entry, but increases the likelihood of survival.

Sustainability and competitiveness in Mexico

“…the roles, responsibilities, and rights of Sustainability and competitiveness individuals and organizations in society. To the extent that they comply, social stability is attained, along with "legitimacy" for the individual or organization (Thomas et al, 2007). Because firms choose to go beyond what is required by applicable laws and regulations, they are responding to the uncodified expectations for business in society.…”

Why Are So Many African Companies Uncompetitive on the Global Stage? Insights from the Global Airline Industry

“…In recent years, this dominance has been challenged by firms originating from emerging economies including Brazil, China, India, Indonesia and Turkey (see Thomas, Eden, Hitt & Miller, 2007;The Economist, 2008). These firms often possess capabilities and resources such as a low-cost base and cutting-edge technologies, which enable them to outclass their counterparts from developed markets when entering other emerging markets (Lall, 1983).…”

The Survival and Stock Performance of Emerging Country Firms in the United States

“…To put it differently, DCFs with experiences in developing countries will obtain a balanced understanding about the two markets; thus, there would be a lower possibility of forming biased cognitions (Thomas, Eden, Hitt, & Miller, 2007) or being misled since they have relatively more comprehensive and all-around experiences. Therefore, the main effects of ownership, relative size and legal status will be weaker for ECFs with international experiences in developing countries.…”

“…But ECFs have chances of interacting with foreign country firms at home due to emerging markets' open market policies. Their alliance experiences with developed country firms in domestic markets increase the likelihood of entry into a developed country, but decrease the likelihood of survival resulting from cognitive biases (Thomas, Eden, Hitt & Miller, 2007). A cognitive bias indicates that the ECFs' executives may be inappropriately confident based on prior alliance experiences with developed market firms when ECFs were operating in developed countries.…”

“…One of the theory's fundamental assertions is that demographic factors such as size (Hannan & Freeman, 1977;Aldrich & Auster, 1986;Hannan & Freeman, 1989;Hannan, Ranger-Moore, & Banaszak-Hall, 1990;Barnett & Amburgey, 1990), age (Stinchcombe, 1965;Carroll, 1983;Freeman, Carroll, & Hannan, 1983;Hannan & Freeman, 1989), inertia, and prior experience (Miller et al, 2008;Thomas, Eden, Hitt, & Miller, 2007) influence the survival of firms. But traditional researchers looked mainly at the DCFs investing in developing and developed countries, and it's a relatively new phenomenon that ECFs step on the international stage and start business in brand new environments.…”