No pain, yet gain?: Learning from vicarious crises in an international context

Abstract

An organizational crisis for other firms in the same industry as a focal firm leads to two major influences: the double-edged sword of learning spillovers and damage spillovers. To suggest optimal ways to promote effective vicarious learning, this study examines the mechanisms and timing of vicarious crises in the international context that yield significant learning spillover (i.e., prevention of future crises) with less damage spillover (i.e., performance downfall) to the focal firm. The results of data analyses of the fatal events in the global airline industry from 1994 to 2012 illustrate that a nonlocal alliance partner's crisis can prevent future crises for a focal firm without performance downfall. However, such significant learning effects take time to appear. On the other hand, a local competitor's crisis leads to prompt performance downfall of the focal firm without significant learning spillovers.