The Role of Distinct Organizational Learning Types in Value Chain Fine-Slicing Decisions

Abstract

While the progressive development of an organization’s international footprint has been described as a major learning process in which firms follow different stages as they progress on their international commitments, few studies have analyzed how organizations combine particular learning mechanisms as they enter new geographies. We address this lacuna by examining two particular learning types – experiential and vicarious – for their influence on firm-level fine-slicing value chain activities. Findings from an analysis of 660 sourcing implementations undertaken by firms headquartered in 17 countries and operating in 57 host countries provide broad support for our hypotheses. Specifically, experiential learning has a differential effect on fine-slicing decisions depending on whether such first-hand knowledge has previously been obtained from general foreign experience or in the focal country in question. In contrast, our results suggest that firms use vicarious learning processes as a mechanism to reduce uncertainty about the operation in a given country, and allocate entire processes rather than discrete tasks, when they are following the path of a leading firm in their sector.