Firm performance, expansion experience and current expansion forms: The United States international telecommunications service industry, 1985--1998.

Abstract

In this dissertation I investigate the influence of firm relative performance and prior expansion experience on the likelihood and form of foreign market expansion by all firms in the United States international message telephone service industry between 1985 and 1998. Employing theories of organizational change, learning and structural inertia, I argue that firm foreign market expansion is directly affected by both firm characteristics (performance and experience) and its competitors' expansions (competitive contagion). I extend these theories by arguing that the imitative form of expansion, as captured by the influence of competitive contagion, is moderated by performance and experience. I hypothesize that there is a non-monotonic U-shaped relationship between relative performance and expansion, and that expansion experience has a monotonic positive effect on expansion. I then hypothesize that increasing relative performance and expansion experience, which decrease uncertainty in expansion, decrease the strength of imitation in expansion. I find that both performance and experience have significant monotonically positive effects on expansion. The strength of imitative expansion is unaffected by expansion experience, however rising relative performance decreases the strength of imitation. These findings lead to three theoretical implications for firm change and learning. First, the positive relationship between performance and expansion suggests that firm change research founded on the behavioral theory of the firm depends on the context of change and is potentially mis-specified in the behavioral assumption of satisficing. Second, the finding that improving performance increases the likelihood of expansion but also decreases the influence of contagion suggests that exploitative and explorative search forms are not mutually exclusive. Third, the strength of competitive contagion in expansion, even in the presence of firm characteristics, provides strong support for studies of change that include both firm and inter-firm characteristics.