The Effects of Indirect Learning on Subsidiary Survival: Conceptualization and Propositional Development

It is widely accepted that a firm’s prior experience plays a critical role in its success for market entry. Nonetheless, some firms have recently achieved substantial growth in foreign markets even though they have little experienced the markets. Extant studies do not satisfactorily explain the performance of these firms. Drawing on the organizational learning theory, the author posits that indirect learning can be a driver of success for entry into foreign markets. Specifically,firms may overcome their lack of direct experience in foreign markets by learning indirectly through their foreign rivals in domestic markets, domestic competitors in foreign markets, global competitors, and inter firm relationships. Drawing on the knowledge-based view and organizational learning literature, the author develops an empirically testable model in order to explain the effect of indirect learning on the survival and success of firms in foreign markets. The author offers important implications of the model for theory and practice and discusses the limitations of the current research and the directions of future research.