Learning to Compete in a Transition Economy: Experience, Environment, and Performance

Abstract

Does organizational learning as measured by experience in a host country affect international expansion performance? If so, does such a relationship between experience and performance hold over time? How do the environmental forces in the host country affect such a relationship? Focusing on organizational learning by multinational enterprises (MNEs) operating in a transition economy, this study answers these three critical questions by exploring the relationships among experience, environment, and performance at the subsidiary level. Based on a recent survey of 108 MNE subunits operating in China, we find that the intensity and diversity of host country experience is an important predictor of subunit performance. While the positive effect of the intensity of experience on performance diminishes over time, the impact of the diversity of experience on performance remains unchanged. Moreover, for MNEs experiencing greater environmental dynamism, complexity, and hostility, there is a stronger positive relationship between experience and performance.