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The multi-faceted role of experience dealing with policy risk: The impact of intensity and diversity of experiences

Alfredo Jiménez, Diana Benito-Osorio, Jonas Puck and Patricia Klopf

International Business Review, 2018, vol. 27, issue 1, 102-112

Abstract: Firms learn from their previous experience, transfom routines into knowledge and thus develop capabilities. This holds for the market- and the non-market environment likewise. Experience is therefore useful to deal with policy risk arising from potential discretional and opportunistic behavior of political authorities, such as governments. We argue that firms can not only learn from the intensity of experience dealing with policy risk, but also from the exposure to a more diverse range of policy risk across different political environments. Testing a sample of 164 Spanish multinational firms, we find that the positive impact of diversity of experiences on the scope of internationalization is more important than the intensity of experience. Moreover, we also find a moderating impact between both types of experience. Overall, our findings emphasize the multi-faceted nature of experience and the need to disentangle the impact and interrelationships of its different components.

Keywords: Policy risk; Experience; Intensity; Diversity; Foreign direct investment; Multinational enterprises; Scope of internationalization; Political capabilities; Political risk; Organizational learning (search for similar items in EconPapers)
Date: 2018
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