Organizational Learning from Extreme Performance Experience: The Impact of Success and Recovery Experience

Abstract

This paper argues that two different types of a firm's own extreme performance experiences—success and recovery—and their interactions can generate survival-enhancing learning. Although these types of experience often represent valuable sources of useful learning, several important learning challenges arise when a firm has extremely limited prior experience of the same type. Thus, we theorize that a certain threshold of a given type of experience is required before each type of experience becomes valuable, with low levels of experience harming the organization. Furthermore, we propose that success and recovery experience will interact to enhance each other's value. These conditions can help overcome learning challenges such as superstitious learning or learning from small samples. We investigate our ideas using a sample of the U.S. commercial banks founded between 1984 and 1998. Our results indicate that both success and recovery experience of a firm generate survival-enhancing learning, but only after a certain level of experience is reached. Furthermore, success and recovery experience enhance each other's learning value, consistent with the theories that emphasize the importance of richer and contrasting experience in providing useful knowledge. Our framework advances organizational learning theory by presenting a contingent model of the impact of success and recovery experience and their interaction.

Learning from My Success and from Others' Failure: Evidence from Minimally Invasive Cardiac Surgery

“…We find that individuals with a greater number of prior successes are more able to learn from their failures than those with fewer successes, a result consistent with the findings of Kim et al (2009) at the organizational level. Our effect may be a result of reduced self-threat, additional knowledge, or associative learning.…”

“…Combined with the knowledge gained through failure, an individual can work through the process of creating and then testing new hypotheses. Finally, research on associative learning offers evidence as to why prior success may help individuals respond to failure (Sternberg 2003;Kim, Kim and Miner 2009). When failure occurs after a series of successes, it marks a salient deviation that may be noticed precisely because of its salience (Taylor and Fiske 1978).…”

The impact of habitual entrepreneurial experience on new firm closure outcomes

“…For example, unlike day-to-day operational issues where there are evident gains from the repetition of tasks (Thompson 2009), developing and implementing strategies to about how to enter a market, thwart the competition, or meet consumer needs are infrequent occurrences. Consequently, this increases the likelihood of founders basing their decisions on small sample sizes which limits opportunities to apply relevant evidence to the current situation (Kim et al 2009). Inferential errors are also likely because individuals tend to focus on successful rather than unsuccessful outcomes.…”

“…Second, individuals are prone to cognitive biases such as over-optimism or over-confidence. The asymmetry between subjective beliefs about ability and actual ability adds to the likelihood of dysfunctional outcomes (Kim et al 2009). Finally, individuals struggle to identify outcomes because it is difficult to specify the dimensions of success or failure (Zollo 2009).…”

All teach, all learn, all improve?

“…Success stories reveal possible practices worth adopting, whereas failure stories save teams from implementing practices that would stall or reverse their improvement efforts. Organizational learning research suggests that both types of knowledge-knowledge of do's and don'ts-are valuable for teams and organizations striving to implement new and better processes in a timely manner (Kim, Kim, & Miner, 2009). Hansen (1999) found that new-product development teams that leveraged their external ties performed better on their projects.…”