An Advantage of Newness: Vicarious Learning Despite Limited Absorptive Capacity

Forthcoming at Organization Science

36 Pages Posted: 17 May 2011 Last revised: 12 Dec 2012

See all articles by Hart E. Posen

Hart E. Posen

University of Wisconsin-Madison

John S. Chen

University of Florida

Multiple version iconThere are 2 versions of this paper

Date Written: November 29, 2012

Abstract

Entrants are often viewed as suffering from a “liability of newness” — at founding they rarely possess the knowledge and capabilities necessary to compete and survive. They can overcome this liability by learning vicariously from the knowledge of incumbent firms. But how can entrants learn from external knowledge when they lack the prior related knowledge that forms the basis of absorptive capacity? We theorize that the process of internal experiential learning facilitates learning from external knowledge, particularly for entrants. To test this theory, we examine learning using a comprehensive set of U.S. commercial banking firms, including a full census of entrants. Our estimates suggest that the share of vicarious learning realized in the process of experiential learning is twice as large for entrants as for incumbents. In this sense, entrants enjoy an “advantage of newness” in learning.

Keywords: Entry, Organizational Learning, Absorptive Capacity

Suggested Citation

Posen, Hart E. and Chen, John S., An Advantage of Newness: Vicarious Learning Despite Limited Absorptive Capacity (November 29, 2012). Forthcoming at Organization Science. Available at SSRN: https://ssrn.com/abstract=1827902 or http://dx.doi.org/10.2139/ssrn.1827902

Hart E. Posen (Contact Author)

University of Wisconsin-Madison ( email )

Madison, WI
United States

HOME PAGE: http://bus.wisc.edu/faculty/hart-posen

John S. Chen

University of Florida ( email )

PO Box 117165, 201 Stuzin Hall
Gainesville, FL 32610-0496
United States

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