SEARCH tel. +44 (0)203 031 2900 CHALLENGE US MY FAVOURITES ACCOUNT LOG OUT HOME ABOUT IDEAS LIBRARY IDEAS BY INSTITUTIONS Home Ideas Library Working Abroad: The Value of Experience 10.13007/205 Ideas for Leaders #205 Working Abroad: The Value of Experience Key Concept Intuitively, experience reduces the chance of failure. An experienced manager will make fewer mistakes than the inexperienced manager. The same logic can be applied to international business activity: companies experienced in foreign markets are going to fail less frequently than companies without foreign experience. New research shows, however, that this assumption is too simple. Previous experience in a foreign market helps if the company returns to that market. It also helps if the company ventures into a different foreign market, but only, the research shows, as long as the situational context between the new market and the previously experienced market is similar. If the context is dissimilar, it is actually better to have no experience in foreign countries than irrelevant experience; previous irrelevant experience becomes harmful. Idea Summary Susan Perkins, a professor at Northwestern University’s Kellogg School of Management, and a visiting professor at MIT’s Sloan School of Management, sought to empirically measure the role of prior international experience in the success or failure of a firm’s subsequent international activities. She based her research on data from the investment activity of 96 foreign-owned firms in the Brazilian telecom industry between 1997 and 2004. The parent companies of these firms came from 18 home countries. Using a variety of methodologies, Perkins was able to determine the similarities and differences between the regulatory environments of a number of different countries. This was required so that she could identify compare the prior foreign environment experienced by the firms in her research with the environment they were facing in Brazil. The choice of the telecommunications industry was helpful because of its codified regulatory environment. Based on the research, Perkins confirmed the following hypotheses and conclusions: Multinational firms with prior experience in institutional environments similar to the target country’s environment are more likely to succeed. In other words, if a firm experienced with an institutional environment that was similar to Brazil’s is more likely to succeed than a firm with a foreign experience that was dissimilar to Brazil’s institutional environment. The learning penalty from dissimilar experience was disproportionate to the learning advantage from similar experience. Perkins’ research illustrated that the likelihood to fail after experiencing a dissimilar environment was much higher than the likelihood to succeed from experience in a similar environment. Authors Perkins, Susan E. Institutions Kellogg School of Management Source Administrative Science Quarterly Idea conceived January 2012 Idea posted September 2013 DOI number Subject Globalization Cross-cultural Management Emerging Markets Global Operations Haven't found what you need? Challenge us GO
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HOME ABOUT IDEAS LIBRARY IDEAS BY INSTITUTIONS
Home Ideas Library Working Abroad: The Value of Experience
10.13007/205
Ideas for Leaders #205
Working Abroad: The Value of
Experience
Key Concept
Intuitively, experience reduces the chance of failure. An experienced manager
will make fewer mistakes than the inexperienced manager. The same logic
can be applied to international business activity: companies experienced in
foreign markets are going to fail less frequently than companies without
foreign experience.
New research shows, however, that this assumption is too simple. Previous
experience in a foreign market helps if the company returns to that market. It
also helps if the company ventures into a different foreign market, but only,
the research shows, as long as the situational context between the new
market and the previously experienced market is similar. If the context is
dissimilar, it is actually better to have no experience in foreign countries than