Experiential knowledge

The current experience of a firm has been analyzed in a variety of previous stud-ies to see its impact on the choice of foreign operation mode (Erammilli 1991;

Agarwal and Ramaswami 1992; Bell 1996) and international development (Jo-hanson and Vahlne 1977; Sullivan and Bauerschmidt 1990; Chetty and Eriksson 2002). Although prior studies mainly addressed the relationship between experi-ential knowledge and the choice of operation mode, the stance of the argument is different when a relationship between experiential knowledge and export-related capability development is considered (Morgan et al. 2003). Experiential knowl-edge is viewed here with a specific focus on how it results in organizational learn-ing and capability development when widely adopted within the firm.

The knowledge base of an export venture is shown in Table 4. Two types of knowledge constitute the experiences of a firm: experiential knowledge (Penrose 1959) and objective knowledge.

Table 4. Knowledge base of an export venture

Knowledge types Characteristics

Experiential Knowledge

General Knowledge

Specific Knowledge

accumulated through learning by doing

knowledge needed for per-forming export-related opera-tions

Transferable from firm to firm

specific to individual markets tacit

sticky to its origin

informational knowledge as the specific knowledge of the market

Objective Knowledge Accumulated through market research

Explicit

From Table 4, experiential knowledge can be divided into general and specific knowledge. Carroll, Rudolph and Hatakenaka (2002) mention that firms facing rapid changes in the environment (industry uncertainty conditions) struggle to utilize interdependent sets of knowledge and combine skills and knowledge de-rived from specific as well as general knowledge. General knowledge is the knowledge needed for performing export-related operations and is transferable from firm to firm. Specific knowledge is that which is specific to individual mar-kets and is tacit and sticky to its origin (Johansson and Vahlne 1977). Experiential

knowledge accumulated through learning by doing is a source of input for deci-sion-making when problems or opportunities arise; specifically in situations of uncertainty when information is difficult to acquire from other sources. General and specific market-related knowledge influences the relationship between the target market choice and firm performance. Other studies mention informational knowledge as the specific knowledge of the market of either consumers or dis-tributors which is needed to perform certain activities (Morgan et al. 2003). Mor-gan et al. (2003) conclude that the knowledge base of export venture consists of a combination of interrelated general, specific, informational and experiential knowledge.

Experiential learning may occur when knowledge is created by direct observation of or participation in events, or from a positive and negative reinforcement of prior choices. It allows required tasks to be effectively and efficiently accom-plished (Levitt and March 1988; Fiol 1994; Helfat 1997; Corbett 2005). Natu-rally, experiences with positive outcomes are reinforced and adopted in firms and experiences with negative outcomes are discarded.

Nelson and Winter (1982) relate the conversion process of experiential knowl-edge into learning through organizational capabilities such as routines. In their opinion, prior experience helps to gain an understanding of the outcome of a rou-tine for solving an organizational problem. Furthermore, repeated use of previous routines for performing export-related tasks may eventually turn them into organ-izational processes called capabilities (Morgan et al. 2003). In this sense, experi-ential knowledge can be used as a tool to formulate organizational processes that enable the effective and efficient accomplishment of tasks, allowing firms to suc-cessfully adapt to the foreign market and follow market commitment.

Eisenstein and Hutchinson (2006) mention in their study about the acquisition of market knowledge that learning from experiences is of value when it is used re-peatedly for making decisions about concrete actions, observing the outcomes and then further changing the organizational behaviour to adopt changes. Feedback and evaluation of the outcomes of the decisions are important for the development of general knowledge which is used for performing specific tasks in the firm. In their study, three experiments that investigate the effects of what is learnt and how transferable that learning is across related decision tasks are examined. The results of the study reveal that experiential learning is likely to be a risky proposi-tion as it could either be completely accurate and efficient or completely biased and full of errors.

In rapidly changing and complex markets, the benefits of experiential knowledge are somehow limited, unless entrepreneurs interact with various types of

edge(s) in order to develop new knowledge and adopt a proactive view of knowl-edge development and risk-taking. Further, in complex markets, where technol-ogy and customer-choice change rapidly, the complexity of the problem in-creases. In these situations, experiential knowledge may not provide a full benefit and firms go through the process of a cognitive search to acquire knowledge re-lated to the new situation (Chihmao, Jack and Todd 2007).

However, other studies analyze the effects of experiential learning within the pro-cess of opportunity identification and exploitation (Corbett 2005). Prior knowl-edge of customer problems and also markets and the ways they can be served has been positively linked to successful opportunity identification if used in combina-tion with new knowledge. Chetty, Eriksson and Lindbergh (2006) in their study of three types of firm experiences: international, country and ongoing business ex-periences, consider how such experiences influence the perceived importance of institutional knowledge in the internationalization process. The study cross-analyzes experiences at different levels and in varying time frames. Analyzing 1010 firms, they find that a variety in experiences from ongoing as well as multi-ple past business deals in various countries has a positive effect on institutional knowledge development, as compared to multiple past experiences in a specific country.

In sum, experiential knowledge can be related to firm-specific capabilities, pro-vided the market information acquisition and dissemination processes as mecha-nisms for learning about markets exist at the organizational level. Two of the ca-pabilities arising from experiential knowledge are discussed below.

4.3.1.1 Alliance management capability

Experiential knowledge concerns accumulated learning relevant to doing business in the foreign market. However, in the context of managing strategic alliances, experiential knowledge would concern utilizing it with alliances in new foreign markets. Previous experience in dealing with alliances in foreign countries en-ables a firm to better match a partner’s characteristics and to acquire local knowl-edge from them. Thus, to efficiently utilize experiential knowlknowl-edge in the alliance management area, it must be embedded in the routines and processes that firms adopt to deal with partners. It can be proposed that:

H1 a: The alliance management capability of an exporting firm will have a posi-tive relationship to export expansion speed.

H1 b: The alliance management capability of an exporting firm will have a posi-tive relationship to export expansion success.

4.3.1.2 Marketing planning and implementation capability

Cavusgil and Zou (1994) identified that an export marketing strategy is the means by which a firm responds to the interplay of internal and external forces to meet the objectives of the export venture. The export marketing strategy broadly in-cludes all aspects of the conventional marketing plan, including product, promo-tion, pricing and distribution. In their view, the choice of the export marketing strategy is profoundly influenced by the knowledge base of an organization. Spe-cifically, this refers to the capabilities which enable a firm to execute a marketing strategy, such as marketing planning and implementation capability. The relevant skills and knowledge used in the implementation of the marketing strategy are significant to success in foreign markets. Therefore, marketing related skills and prior experience enables a firm to identify specific characteristics of that export market, to develop an appropriate marketing strategy and to execute it effectively.

Several kinds of marketing-related capabilities have been mentioned in literature which enables a firm to execute its marketing strategy. Day (1994b) identifies sensing capabilities as the key sources of market competence in market-driven organizations. A market-sensing capability determines how well the firm is equipped to continuously sense changes in its market and to anticipate the re-sponses to marketing actions. The KBV presents similar ideas using the term

‘marketing capability’ (Weerawardena 2003; Kotabe, Srinivasan and Aulakh 2002). However, the marketing capability phenomenon is a narrow construct and specifically focuses on the ability of the firm to produce a differentiated product and to sustain a brand position. Kotabe et al. (2002) refer to marketing capability as ‘the ability of a firm to differentiate products and services from competitors and build successful brands.’

Morgan et al. (2003) however, identify through a survey of 445 companies in China and the UK that the marketing planning and implementation capability of exporting firms is one of the primary mechanisms by which accumulated experi-ential knowledge can be utilized to better adapt to their market environment.

Marketing implementation capability refers to implementing the planned market-ing strategy into the foreign market so as to achieve expected targets. To put planning into actions, firms adapt to the existing market, change or upgrade pre-vious tasks not suitable to a given foreign market and allocate resources required for the implementation of the planned strategy. Thus, utilizing accumulated learn-ing in the area of marketlearn-ing plannlearn-ing and implementation can be positively linked to the development of such capabilities.

Thus it can be proposed:

H 2a: The marketing planning and implementation capability will have a positive relationship to export expansion speed.

H 2b: The marketing planning and implementation capability will have a positive relationship to export expansion success.