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Organizational learning and top management experience: insights from the growth strategies of biopharmaceutical ventures

Author: Ener, Hakan INSEAD Area: StrategyPublisher: Fontainebleau : INSEAD, 2009.Language: EnglishDescription: 154 p. : Graphs ; 30 cm.Type of document: INSEAD ThesisThesis Note: For the degree of Ph.D. in management, INSEAD, June 2009Bibliography/Index: Includes bibliographical referencesAbstract: This dissertation contains three empirical studies, each dealing with the growth of entrepreneurial firms by expanding into new domains of activity, such as new product markets. The first chapter deals with the antecedents of firms' moves into new product markets, explaining these decisions as a dynamic interplay between learning from diverse experience and performance feedback. The second chapter explains how top management experience influences firms' performance in new product markets, identifying a surprising trade-off: while highly experienced top executive teams help their firms to rapidly achieve initial performance goals, they eventually hinder organizational learning and end up achieving lower operating performance in the longer term. In the same chapter, I identify career variety as a potential solution to overcome this experience pitfall. Finally, in the third chapter, I examine how rapid organizational growth in new product markets impacts firms' core businesses, and why reconfiguring top management teams is crucial during this growth periods. The findings call for re-examining a fundamental assumption in theories of organizational learning, namely that acquiring more knowledge and experience is better for enhancing firm performance over time. In line with this conventional wisdom, firms often recruit experienced top executives from incumbent firms when expanding into new product markets. Empirical analyses reported here provide evidence that this practice is often counter-productive, based on results from regression models that relate top executives' career experiences to product development performance in a sample of rapidly growing firms in the biopharmaceutical industry over two decades. Firms' patterns of achieving successive milestones in these projects lends support to my theory of how individual experiences should be combined (and reconfigured over time) in the leadership team in order to enhance operating performance as firms expand into new markets. The results clarify the boundary conditions on the value of individual experience in organizational leadership roles, and contribute to the current debate on the micro-foundations of firm capabilities. List(s) this item appears in: Ph.D. Thesis
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For the degree of Ph.D. in management, INSEAD, June 2009

Includes bibliographical references

This dissertation contains three empirical studies, each dealing with the growth of entrepreneurial firms by expanding into new domains of activity, such as new product markets. The first chapter deals with the antecedents of firms' moves into new product markets, explaining these decisions as a dynamic interplay between learning from diverse experience and performance feedback. The second chapter explains how top management experience influences firms' performance in new product markets, identifying a surprising trade-off: while highly experienced top executive teams help their firms to rapidly achieve initial performance goals, they eventually hinder organizational learning and end up achieving lower operating performance in the longer term. In the same chapter, I identify career variety as a potential solution to overcome this experience pitfall. Finally, in the third chapter, I examine how rapid organizational growth in new product markets impacts firms' core businesses, and why reconfiguring top management teams is crucial during this growth periods.
The findings call for re-examining a fundamental assumption in theories of organizational learning, namely that acquiring more knowledge and experience is better for enhancing firm performance over time. In line with this conventional wisdom, firms often recruit experienced top executives from incumbent firms when expanding into new product markets. Empirical analyses reported here provide evidence that this practice is often counter-productive, based on results from regression models that relate top executives' career experiences to product development performance in a sample of rapidly growing firms in the biopharmaceutical industry over two decades. Firms' patterns of achieving successive milestones in these projects lends support to my theory of how individual experiences should be combined (and reconfigured over time) in the leadership team in order to enhance operating performance as firms expand into new markets. The results clarify the boundary conditions on the value of individual experience in organizational leadership roles, and contribute to the current debate on the micro-foundations of firm capabilities.

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