Making the Next Move: How Experiential and Vicarious Learning Shape the Locations of Chains' Acquisitions

• Published in: Administrative science quarterly Vol. 45; no. 4; pp. 766 - 801
• Main Authors: Joel A. C. Baum, Li, Stan Xiao, Usher, John M.
• Format: Journal Article
• Language: English
• Published: Los Angeles, CA Cornell University Samuel Curtis Johnson Graduate School of Management 01.12.2000; SAGE Publications; Sage Publications, Inc; Cornell University, Graduate School of Business and Public Administration
• Subjects: Acquisitions and mergers; Administrative science; Chain stores; Decision Making; Economic competition; Economic geography; Experiential learning; Financial analysis; Geodetic position; Horizontal integration; Interorganizational Networks; Interorganizational Relations; Learning; Learning, Psychology of; Location of enterprises; Mergers; Momentum; Nursing Homes; Observational learning; Ontario; Organizational Behavior; Organizational Change; Organizational Development; Organizational structure; Perceptual localization; Planning; Take-overs; Target acquisitions; Variable coefficients; United States
• ISSN: 0001-8392; 1930-3815
• DOI: 10.2307/2667019

We examine acquisitions by multiunit chain organizations to determine why they acquire a particular target rather than others that are available to them and thus better understand chain growth. We advance experiential and vicarious learning processes as an explanation for chains' next spatial move. Our analysis of Ontario nursing home chains' acquisition location choices from 1971 to 1996 provides broad support for a learning perspective, demonstrating how experiential and vicarious processes shape and constrain the locations of chains' acquisitions. Experiential processes lead chains to replicate themselves by acquiring components geographically and organizationally similar to their own most recent and most similar prior acquisitions and their own current components. Vicarious processes lead chains to imitate location choices of other visible and comparable chains' most recent acquisitions, prior acquisitions nearest to potential targets, and their current components. Our study thus establishes organizational learning as a conceptual foundation for predicting the location of a chain's next acquisition and, more generally, the spatial expansion of chains over time.