Uncertainty Versus Learning: A Network Appraoch for Corporate Strategic Partner Selection

Abstract

Uncertainty and learning play important twin roles in interorganizational partner selection decisions. Research reveals that companies try to reduce uncertainty by engaging in repeated ties with partners who are familiar, who are tied to common third partners, who are similar along relevant strategic or organizational dimensions, or with partners controlling complementary resources. Because organizations learn from their own experience and from the experience of their partners, one way to understand global network structures is to analyze how uncertainty and learning jointly affect the propensity of individual organizations to build local network ties. This paper combines theory and empirical evidence to develop an analytical framework examining the dynamic relationship between uncertainty, organizational learning, and the formation of interorganizational network ties. I report clear evidence that organizational uncertainty increases the likelihood that companies will engage in corporate acquisition activities. I also find that organizational learning and past experience play important roles in acquisition partners? selection, i.e., the greater the cumulative number of acquisition events in which a company has been involved in previously, the higher the likelihood that it will engage in further acquisition events in the future. Finally, I demonstrate that an organization?s past experience in corporate acquisitions affects its choice of network partner.