Abstract
Organizations are trying to attain and sustain competitive advantage in the highly competitive business world settings. It is argued that one of the strategies to achieve competitive advantage is to form learning organizations. Diversification strategies of organizations are important growth decisions managers need to make. In this paper, organizational learning, learning organization, fundamental diversification strategies and the link between learning and diversification in the literature were discussed shortly. Then, the link between them was revisited considering the literature with a schema. At last, a causal model was introduced. Model suggested that When a company decides to expand its operations by adding new products related to existing product line, with the aim of exploiting its existing knowledge base, this company can reach superior financial performance (financial performance means profitability) through generative learning. When a company decides to grow by adding a new product line irrelevant to existing product lines, with the aim of exploring new knowledge, then through generative learning, this company can introduce or develop new technologies in forms of new products/services, in other words make innovation. Unrelated diversification does not directly provide high financial performance. But gradually, as the innovation gain awareness, it brings in superior financial performance more than related diversification can bring in.
Highlights
Organizations are trying to attain and sustain competitive advantage in the highly competitive business world settings
While a business operating in more than one sector is an indication that it applies a product diversification strategy, it is said that businesses operating in two or more geographic markets are implementing a market diversification strategy
The effect of organizational learning on firm performance has been widely investigated and confirmed. They infer from the existing literature that the attitude of exploration makes firms tend to discover new markets and create new products through unrelated diversification, and in the short run, it is not possible to realize a significant financial improvement
Summary
Organizations are trying to attain and sustain competitive advantage in the highly competitive business world settings. According to Senge, attempts to solve existing problems without questioning the underlying fundamental issues in the organizations is called as “adaptive learning” He argues that “adaptive approaches to learning originated from our tendencies to see the world as a combination of separated and unrelated forces”, and “prevent us to make sense of the parts as a larger whole”. Senge indicates that generative learning requires new perspective and a holistic approach, and in that sense improves capacity to create something new in individuals within organizations In a way, it is a continuous learning experience all around the organization [3]. Mutual learning model indicates that exploitation activities result in quick learning of organizational code, so organizations can quickly changes their practices to conform the environmental changes. Practices of organizational code in exploitation can be modified and conformed much more so it removes interpersonal heterogeneity; while exploration requires great effort and time, and results in greater interpersonal heterogeneity [6]
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