Value‐Enhancing Learning from Industry‐Wide Diversification Experience

15 Pages Posted: 5 Apr 2016

See all articles by Thang Nguyen

Thang Nguyen

Portsmouth Business School

Charlie X. Cai

University of Bradford - School of Management

Date Written: February 2016

Abstract

Diversification is an important strategic decision and a rare event. By definition, when undertaking a new diversification, a firm will not have direct internal experience of the venture. In this regard, external experience of similar diversifications provides a valuable lesson pool for the focal manager. While there are many studies of internal learning in organizational learning literature, research on external learning is still scarce. This paper proposes a theoretical framework for external experiential learning and applies it to a study of the effect of industry experience on diversification value. It reports the novel finding of a cubic relationship between external learning from industry experience and diversification value. This indicates that industry experience matters to the outcomes of strategic decisions, but that the effect of this external experience on learning is conditional upon certain characteristics of the experience: namely, specificity and heterogeneity.

Suggested Citation

Nguyen, Thang and Cai, Charlie X., Value‐Enhancing Learning from Industry‐Wide Diversification Experience (February 2016). British Journal of Management, Vol. 27, Issue 2, pp. 323-337, 2016, Available at SSRN: https://ssrn.com/abstract=2759065 or http://dx.doi.org/10.1111/1467-8551.12151

Thang Nguyen (Contact Author)

Portsmouth Business School ( email )

Portsmouth, PO1 3DE
United Kingdom

Charlie X. Cai

University of Bradford - School of Management ( email )

Emm Lane
Bradford, West Yorkshire Bd9 4JL
United Kingdom

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