An Advantage of Newness: Vicarious Learning Despite Limited Absorptive Capacity

Hart E. Posen () and John S. Chen ()
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Hart E. Posen: University of Wisconsin–Madison, Madison, Wisconsin 53706
John S. Chen: University of Michigan, Ann Arbor, Michigan 48109

Organization Science, 2013, vol. 24, issue 6, 1701-1716

Abstract: Entrants are often viewed as suffering from a “liability of newness”—at founding, they rarely possess the knowledge and capabilities necessary to compete and survive. They can overcome this liability by learning vicariously from the knowledge of incumbent firms. But how can entrants learn from external knowledge when they lack the prior related knowledge that forms the basis of absorptive capacity? We theorize that the process of internal experiential learning facilitates learning from external knowledge, particularly for entrants. To test this theory, we examine learning using a comprehensive set of U.S. commercial banking firms, including a full census of entrants. Our estimates suggest that the share of vicarious learning realized in the process of experiential learning is twice as large for entrants as for incumbents. In this sense, entrants enjoy an “advantage of newness” in learning.

Keywords: experiential learning; vicarious learning; absorptive capacity; entry (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ororsc:v:24:y:2013:i:6:p:1701-1716

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