Organizational Learning and Interfirm Control: The Effects of Partner Search and Prior Exchange Experiences

Partner search processes and prior exchange experiences constitute important organizational learning processes that provide firms with valuable partner information, which may enhance their ability to design control structures for new interfirm transactions. By increasing trust and by providing first-hand partner information, prior experiences may, however, also reduce the need for control and for new information during the search process. An analysis of 287 transactions between buyers and suppliers of information technology supports that partner search and experience facilitate learning and subsequent control design, but that partner experience simultaneously reduces the need for control and the intensity of the partner search process. Our findings thus indicate that partner experience can have opposite and offsetting effects on control design, which contributes to the discussion on whether prior exchange experiences complement or substitute formal control.