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E Pluribus Unum: Organizational Size and the Efficacy of Learning

  • Hart E. Posen
  • Dirk Martignoni
  • Daniel A. Levinthal
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    Learning from experience is a central theme in the management literature. While in general experiential learning is viewed as efficacious, the literature increasingly points to the difficulties inherent in the learning process — many of which stem from a deficit of information about the merits of alternative solutions. It seems plausible that larger organizations, with their capacity to simultaneously pursue a variety of potential solutions to a given challenge, may overcome this deficit. Such a perspective suggests that the efficacy of an organization's learning process should be an increasing function of organizational size. While this logic is intuitively appealing, we find that it does not fully capture the nuances of the organizational learning process. We employ a computational model and find that larger organizations, as characterized by their scale in pursuing parallel initiatives: (a) explore less than smaller organizations, (b) are less likely to discover the very best alternative, and yet (c) on average identify better alternatives. Increasing the number of parallel initiatives guides the search process towards viable alternatives, but it does so at the cost of inhibiting search breadth. Thus, in our model, the characteristics of learning by larger organizations do not result from differences in inertia or incentives that may impede learning and innovation, but rather from the properties of the organizational learning process itself.

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    File URL: http://www3.druid.dk/wp/20130009.pdf
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    Paper provided by DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies in its series DRUID Working Papers with number 13-09.

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    Date of creation: 2013
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    Handle: RePEc:aal:abbswp:13-09
    Contact details of provider: Web page: http://www.druid.dk/

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    1. Burton, Richard M. & Minton, John W. & Obel, Børge, 1991. "Organizational size and efficiency: An information processing view," Scandinavian Journal of Management, Elsevier, vol. 7(2), pages 79-93.
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    4. Sendil K. Ethiraj & Daniel Levinthal & Rishi R. Roy, 2008. "The Dual Role of Modularity: Innovation and Imitation," Management Science, INFORMS, vol. 54(5), pages 939-955, May.
    5. Michael J. Lenox & Scott F. Rockart & Arie Y. Lewin, 2006. "Interdependency, Competition, and the Distribution of Firm and Industry Profits," Management Science, INFORMS, vol. 52(5), pages 757-772, May.
    6. Reinganum, Jennifer F, 1983. "Uncertain Innovation and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 73(4), pages 741-48, September.
    7. Daniel A. Levinthal, 1997. "Adaptation on Rugged Landscapes," Management Science, INFORMS, vol. 43(7), pages 934-950, July.
    8. Todd R. Zenger & Sergio G. Lazzarini, 2004. "Compensating for innovation: Do small firms offer high-powered incentives that lure talent and motivate effort?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(6-7), pages 329-345.
    9. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
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