Stakeholder Engagement and Organizational Experiential Learning: Evidence from M&A

Abstract

Previous literature has shown that the relationship between accumulated experience and performance of a focal task is more complex than how it has been represented by the learning curve pattern. Experience in previous tasks can have a positive, negative or null effect on the performance of a focal task, depending on a number of conditions. The purpose of this paper is to advance the understanding of firm?s experiential learning by focusing on one specific condition that can influence this process -the relationships the firm has established with its stakeholders. We argue that a firm?s engagement with its stakeholders can have both positive and negative effects on its ability to extrapolate knowledge from previous experience and to apply it to a focal task. At the same time we propose that the sign and the magnitude of the effect may depend on the extent to which the focal task is novel compared to previously undertaken tasks. We test these arguments on a sample of corporate acquisitions from US listed firms. Consistent with the arguments developed, experience accumulated by stakeholder engaging firms are found to be useful (i.e. positively associated with focal task performance) when the focal task is familiar, and harmful when it is novel.Jelcodes:M10,- ABSTRACTPrevious literature has shown that the relationship between accumulated experience and performance of a focal task is more complex than how it has been represented by the learning curve pattern.Experience in previous tasks can have a positive, negative or null effect on the performance of a focal task, depending on a number of conditions. The purpose of this paper is to advance the understanding of firm's experiential learning by focusing on one specific condition that can influence this process -the relationships the firm has established with its stakeholders. We argue that a firm's engagement with its stakeholders can have both positive and negative effects on its ability to extrapolate knowledge from previous experience and to apply it to a focal task. At the same time we propose that the sign and the magnitude of the effect may depend on the extent to which the focal task is novel compared to previously undertaken tasks. We test these arguments on a sample of corporate acquisitions from US listed firms. Consistent with the arguments developed, experience accumulated by stakeholder engaging firms are found to be useful (i.e. positively associated with focal task performance) when the focal task is familiar, and harmful when it is novel.

Environmental management systems and environmental product innovation: The role of stakeholder engagement

“…To capture the degree of a firm's engagement with suppliers, customers, and the local community, we follow the work of Bettinazzi and Zollo (). More specifically, to measure supplier engagement , we used four ASSET4 dummy variables (0 = No; 1 = Yes) that reflect whether a firm tries to improve its communication with the suppliers and is committed to treat suppliers as key business partners (Bettinazzi & Zollo, ).…”

“…To measure customer engagement , we used items from the ASSET4 category dealing with customers (Bettinazzi & Zollo, ), which refer to firms' policies and initiatives towards customer satisfaction, effective communication with customers, and monitoring of customer satisfaction though surveys and other means. These items take various forms (e.g., categorical data, raw data, and percentages); therefore, we used the aggregated z‐score of the specific category, provided by ASSET4, which ranges from 0 to 100.…”

“…Similarly, to measure community engagement, we used all the items included in the “local communities” category of ASSET4, which reflects the capacity of a firm to maintain good relationships with local communities through communication tools and interactive processes (Bettinazzi & Zollo, ). The aggregated score (provided by ASSET4), ranges from 0 to 100.…”

“…Stakeholder engagement reflects a firm's motivation to collaborate and develop trusting relationships with stakeholders (Bettinazzi & Zollo, ). As such, it is associated with a motivation to address stakeholder expectations, which, in turn, is related to the importance a firm attaches to environmental issues and the efforts to internalize EMS in favor of EPI (Boiral, ; Heras‐Saizarbitoria & Boiral, ; Yin & Schmeidler, ).…”

“…We focus on three groups belonging to both primary and secondary stakeholders, namely, suppliers, customers and the local community (Sprengel & Busch, ) to account for potentially different effects on the link between EMS and EPI due to different objectives/motives or institutional logics (Delmas & Toffel, ). Stakeholder engagement reflects a firm's initiatives to communicate and develop trustful relationships with stakeholders (Bettinazzi & Zollo, ). It comprises information exchange and knowledge accumulation on processes that can assist EMS implementation and facilitate innovation (Crilly & Sloan, ; Desai, ).…”