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

• Gong, Yan 
• Zhang, Yu 
• Xia, Jun  

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SSCI Scopus FT ABDC-A*

Abstract

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.

Keyword

• acquisition experience
• acquisition premium
• feedback-based learning
• feedback saliency
• feedback valence

Author Community

[Yan Gong ; Yu Zhang] China Europe International Business School, 699 Hongfeng Rd, Shanghai, 201206, China

[Jun Xia] University of Texas at Dallas

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