Opportunity and Constraint: Organizations’ Learning From the Operating and Competitive Experience of Industries

Organizational learning is central to a number of strategic theories. Recent arguments, however, identify risks associated with learning from own experience in the form of overattention to the short term and local conditions. The experience of the industry may offer opportunities for organizational learning that the experience of the organization does not, because industry experience is more varied, and not tied to the path-dependent history of any one organization. We investigate the influence of own experience and of two types of industry experience on the failure rates of U.S. hotel chains. The two types of industry experience are operating experience, which is a discounted sum of the units operated by U.S. hotel chains in the history of the industry, and competitive experience, which is a discounted sum of the number of failures of U.S. hotel chains in the history of the industry. We find that (a) organizations initially benefit from their own experience, but are harmed in the long run, (b) generalist organizations are more weakly affected by their own experience than specialists, (c) organizations benefit from their industry’s operating experience, accumulated both before and after the organization’s entry, and (d) organizations benefit from their industry’s competitive experience, but only after the organization’s entry. © 1997 by John Wiley & Sons, Ltd.