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Do Firms Learn More From Small or Big Successes and Failures? A Test of the Outcome-Based Feedback Learning Perspective

By: Contributor(s): Material type: TextTextDescription: 1034-1056 pSubject(s): In: DEBORAH E. RUPP JOURNAL OF MANAGEMENTSummary: It has been recognized that previous experiences can provide different types of feedback. However, it has not been systematically explored why firms are more likely to learn effectively from certain types of experience than others. From a feedback-based learning perspective, we argue that it is useful not only to focus on feedback valence (success or failure experiences) but also to examine feedback saliency (the magnitude of the experience’s influence). Based on a sample of acquisitions by U.S. firms, our results indicate that a firm’s success experience drives up the premium that it pays for a subsequent acquisition, whereas a failure experience reduces this subsequent premium. Moreover, we find that the magnitude of the effects of the four types of experiences—small failure, big failure, small success, and big success—does not follow a symmetrical pattern of inverse effects.
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Item type Current library Call number Vol info Status Notes Date due Barcode Item holds
Journal Article Journal Article Main Library Vol 45, Issue 3/ 55510280JA8 (Browse shelf(Opens below)) Available 55510280JA8
Journals and Periodicals Journals and Periodicals Main Library On Display J.O.M./Vol 45, Issue 3/55510280 (Browse shelf(Opens below)) Vol 45, Issue 3 (01/01/2019) Not for loan Journal of Management - March 2019 55510280
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It has been recognized that previous experiences can provide different types of feedback. However, it has not been systematically explored why firms are more likely to learn effectively from certain types of experience than others. From a feedback-based learning perspective, we argue that it is useful not only to focus on feedback valence (success or failure experiences) but also to examine feedback saliency (the magnitude of the experience’s influence). Based on a sample of acquisitions by U.S. firms, our results indicate that a firm’s success experience drives up the premium that it pays for a subsequent acquisition, whereas a failure experience reduces this subsequent premium. Moreover, we find that the magnitude of the effects of the four types of experiences—small failure, big failure, small success, and big success—does not follow a symmetrical pattern of inverse effects.

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