DOES EXPERIENCE IMPLY LEARNING?

Research summary: Research traditionally uses experiential learning arguments to explain the existence of a positive relationship between repetition of an activity and performance. We propose an additional interpretation of this relationship in the context of discrete corporate development activities. We argue that firms choose to repeat successful activities, thereby accumulating high experience with them. Data on 437 aircraft projects introduced through three governance modes show that the positive performance effect of the firm's experience with the focal mode becomes insignificant after accounting for experience endogeneity. We suggest that in a general case, experience with corporate development activities may be tinged with both learning and selection effects. Therefore, omitting to account for experience endogeneity may lead to incorrect conclusions from an empirically observed positive experience-performance relationship. Managerial summary: This paper emphasizes that firms generally choose to undertake the corporate development activities (new product introductions, diversification moves, international expansions, alliances, acquisitions, etc.) with which they have been the most successful in the past and that they expect to be the most successful in the future. Hence, if a firm possesses certain capabilities, it will repeatedly engage in certain activities corresponding to those capabilities, thereby simultaneously achieving high levels of activity experience as well as superior activity performance. This view suggests that an empirically observed positive experience-performance relationship may not be due solely to learning-based enhanced capabilities but may also be driven by astute self-selection. Overall, we provide a new interpretation of the relationship between experience and performance in the context of infrequent, heterogeneous, and causally-ambiguous corporate development activities. Copyright (C) 2015 John Wiley & Sons, Ltd.