O rganizational L earning

1. OrganizationalLearning Bocconi University Allya P. Koesoema Julia Makrushina

2. Proposition statement Proposition 1: Learningincreases the path dependence of firm strategy trajectories but • Proposition 1 alt • Learning does not necessarily imply that firm strategy is constrained by path dependence and local learning

3. Learning • Learning effects • General efficiency • Routines & Capabilities • - Cumulative effect • - Competence multiplier • - Strategic momentum • - Competence traps Strategic trajectory Performance General FrameworksProposition 1:Learning increases strategic path dependence

4. Learning Learning effects General efficiency Routines & Capabilities - Cumulative effect - Competence multiplier - Strategic momentum - Competence traps Strategic trajectory • Other factors • Environmental conditions • Industrial conditions • Internal factors • agency problem • heterogeneity Performance General FrameworksProposition 1 alt:Learning does not necessarily constrain strategic path dependence

5. Learning • Learning • effects Strategic trajectory Other factors Performance Argument 1a:Factors that affect strategic path dependence other than learning effects • The process of organizational learning is a related, but distinct process from firm strategic path • There are multiple mechanisms that may determine a firm’s strategic trajectory, and learning effects is only one of them • Industrial Organization argument: Environmental and Industry characteristics determine firm’s strategic trajectory • Industry concentration and lifecycle, turbulence • Competition and related industries (supply and demand characteristics) • Technological change, scientific inventions, disruptive or radical innovation • Internal factors • heterogeneity inside the firm, Organizational culture, structure • Agency problem: power structure, incentives and conflict (e.g. Crozier) • Institutional factors: Regulation & policy, culture: Isomorphism tendecies (Meyer & Rowan, 1991) • Ecologies of learning: learning in a world of learners, interactions of other learning organizations determine strategic constraints (Levitt and March, 1988)

6. Learning • Learning • effects Strategic trajectory Other factors Performance Argument 1b:Factors that moderate and mediate the learning effect’s impact to strategic path dependence The presence of strong learning effects may not contribute to strategic path dependence • Strong learning effects may not matter/matter less because • Separation between decision making and actual learning units(Brown & Duguid, 1991) • Communities of practice: Separation between canonical and non-canonical knowledge/learning • Distribution and diffusion of learning and knowledge inside organization • Strong Entrepreneurship forces inside organization • Market for the capability/learning results • Codifiability and transaction cost for exchange • Modularity/ interdependence of the learning units, allowing separable “switching” • Current performance relative to aspiration: exploratory tendencies are increased for the case of very high performance or performance below, but relatively near threshold level of aspiration (Huber, 1991)

7. Learning • Learning • effects Strategic trajectory Other factors Performance Local Learning Argument 2a:Strong learning effects do not mean local learning and strategic path dependence One of the main ways learning effects may increase strategic path dependence is by inducing local learning but learning effects do not imply that further learning has to be local • Strong learning effects may not localize learning when • Condition of failure/success relative to aspiration level (Levinthal & March, 1993) • Leadership vision, strong entrepreneurship forces in the firm (Schumpeter, 1934; Kirzner,1973) • Existence of radical and disruptive innovations (Christensen) • Policy and industrial structure incentives for exploration, e.g. patents, funding mechanisms, JV market, bankruptcy laws (Levinthal & March, 1993)

8. Learning • Learning • effects Strategic trajectory Other factors Performance Local Learning Argument 2a:Strong learning effects do not mean local learning and strategic path dependence Strong learning effects do not mean that learning has to be local • Means to break local learning and path dependence • Acquisitions & mobility of experts: Grafting as a method of non local learning/“buying the capability” (Huber, 1991)(Song, Almeida, Wu, 2003) • Alliances and networks: the use of weak ties/small world networks for novel knowledge creation • Joint ventures: separation between exploitation and exploration (Levinthal, March, 1993) • Ambidextrous organization: balancing exploration and exploitation (Tushman & O’Reilly) • Dynamic Capabilities (Teece, Pisano & Shuen) and higher order capabilities (Winter)

9. Learning • Learning • effects Strategic trajectory Other factors Performance Individual action Individual belief organizational action Environmental response Argument 3:learning may not have the desired learning effects: What is Learning? The result of learning may not correspond to expectations, thus the effect of learning to strategic trajectory will be ambiguous • What happened? How? Is it good? • Representations of knowledge/learning results • Causal ambiguity • Complexity of problem • Lack of clear feedback • Superstitious learning (Zollo, 2007) • Misleading assessment of competence and performance feedback from learning March & Olsen, 1975 Incomplete learning cycles

10. Local External Boundary Spanning Internal Boundary Spanning Radical Research Proposal Haleblian (2006): Poor performance challenges the appropriateness of an existing (acquisition related) routine (may erode the legitimacy of the acquisition routine as a valid strategic choice, and the perceived effectiveness of experential lessons embedded in it) Rosenkopf & Nerkar (2001): provide classification of boundary spanning exploration activities of a firm Similar Distant Technological Boundary spanning Similar Distant Organization boundary spanning Rosenkopf & Nerkar, 2001: BEYOND LOCAL SEARCH: BOUNDARY-SPANNING, EXPLORATION, AND IMPACT IN THE OPTICAL DISK INDUSTRY

11. Radical Exploratory tendency External b. spanning Internal b. spanning Local Search • Firm specific • Factors • Age • Size • centralization Routine Legitimation (Haleblian 2006) Performance failure • Industry • specific • Factors • Age • concentration Types of exploration (Rosenkopf & Nerkar, 2001) Research Proposal • Classification of exploration behavior (adapted from Rosenkopf & Nerkar): adding degree of deviation from old organizational routines • The degree of performance failure with respect to aspiration level would increase the degree of explorative behavior via the deviation from old organizational routines • Consideration of moderating effect of firm specific and industry specific factors to the relationship between degree of performance failure and exploration behavior Degree of deviation from Old routiness (Haleblian 2006) Legitimation inertia • Measures • Objective performance • Subjective, relative to aspiration level • Measures • Patent citation • Organizational boundaries: Self/non self citation • Technological boundaries: citation inside/outside technological area

12. Thank you