Freek Vermeulen

International Expansion Through Start-Up or Acquisition: A Learning Perspective

This study brings a fresh approach—a learning perspective—to the literature examining whether firms expand internationally through start-ups or acquisitions. Hypotheses concern how this strategic c...

Learning Through Acquisitions

Research on acquisitions has typically focused on acquisitions per se, examining issues such as performance and implementation problems. This study moves beyond that perspective and studies the inf...

A Healthy Divide: Subgroups as a Stimulus for Team Learning Behavior

This paper examines the relationship between subgroups and team learning behavior, defined as a cycle of experimentation, reflective communication, and codification. We develop the construct of “subgroup strength,” defined as the degree of overlap across multiple demographic characteristics among a subset of team members. Contrary to conventional wisdom, we propose that the presence of subgroups within a team may stimulate learning behavior and that organizational design features, such as performance management by an external leader, team empowerment, and the availability of a knowledge management system, may have different effects on teams, depending on subgroup strength. Data on 156 teams in five pharmaceutical and medical products firms confirmed that moderately strong demographic subgroups in teams fostered learning behavior. In addition, both very homogeneous and very heterogeneous teams were more inclined to engage in learning behavior, but only if we controlled for the concurrent effect of subgroup strength. Finally, subgroup strength moderated the impact of organizational design features on team learning. Overall, this study contributes to the literature on team composition, design, and learning by highlighting the importance of subgroups for understanding team behavior.

Working Abroad, Working with Others: How Firms Learn to Operate International Joint Ventures

Successful international joint ventures entail both learning to operate across national boundaries and learning to cooperate. Hypotheses grounded in organizational learning theory were tested with event-history analysis and data on 1,493 expansions of 25 large Dutch firms between 1966 and 1994. Experience with domestic joint ventures and with international wholly owned subsidiaries contributed to the longevity of international joint ventures, but prior experience with international joint ventures did not.

The Price You Pay: Price-setting as a Response to Norm Violations in the Market for Champagne Grapes

Contrary to the general view that markets are shaped by economic forces, bargaining power, and the prior relationships between exchange partners, this paper posits that markets can sometimes also be purely socially constructed, in the sense that prices can vary irrespective of the economic value embedded in the exchange. Building on insights from the literature on categories, we argue that sellers may react to violations of local norms on the part of particular buyers by charging them higher prices. Sellers thus provide economic benefits, in the form of lower prices, to buyers who closely adhere to the category’s norms. We test these ideas using data on the market for Champagne grapes, examining the exchange between grape growers (the sellers) and the 66 houses that make the sparkling wine (the buyers). Interviews and survey data informed us that growers have clear, normative ideas about what a Champagne house should look like and do: houses that are no longer headed by a descendant of the founder, are not located in one of the traditional Champagne villages, are relative newcomers to the industry, are part of a corporate group, supply supermarket brands, operate winemaking subsidiaries abroad, or acquire their own vineyards are all viewed in a negative light. Our models provide strong support for our prediction, showing that the prices different organizations are charged for their purchases depend substantially on whether they meet local expectations for who they are and what they do. Our qualitative evidence confirms that this differential pricing by growers occurs not through collusion but through a spontaneous, bottom-up process.

The Structure of Competition: How Competition Between One’s Rivals Influences Imitative Market Entry

This paper investigates how the pattern of encounters between a firm’s competitors affects the firm’s inclination to follow its competitors into a new market. We theorize that direct encounters between a firm’s rivals lead to a herding effect, making imitative market entry more likely. Past mutual forbearance between a firm’s competitors (resulting from asymmetric multimarket competition) further strengthens this herding effect, by enhancing the firm’s expectations of market attractiveness. In contrast, aggressive past rivalry between the competitors (resulting from symmetric multimarket contact) dampens these expectations, producing a competition effect that makes herding less probable. We test our idea in two distinct contexts—the Chinese pharmaceutical industry and the Taiwanese computer hardware industry—and find consistent support in both settings. We discuss how our analysis of what we call the “structure of competition” can be extended to research on other forms of firm behavior.

Selection at the Gate: Difficult Cases, Spillovers, and Organizational Learning

We analyze longitudinal data on British fertility clinics to examine the impact of “selection at the gate,” i.e., the attempts of organizations to improve the success rate of their output by selecting promising cases as input. In contrast to what might be expected, we argue that more stringent input selection is likely to lead to lower overt performance compared with those firms that admit difficult cases, because the latter develop steeper learning curves. That is, difficult cases enable greater learning from prior experience because they promote experimentation, communication among various actors, and the codification of new knowledge. Our results confirm this prediction and provide clear evidence that organizations with more difficult cases in their portfolios gradually begin to display performance figures that compare favorably with those of firms that do select at the gate.

Controlling International Expansion

of globalization, many firms struggle for long periods to make their foreign ventures a success. Sometimes they fail altogether. This article argues that the key to success is to stay in control of the process of internationalization. To achieve this, firms need to follow a set of basic principles that will cause their expansion to unfold in a consistent pattern. They should build on the company’s existing knowledge base, give priority to expansion via greenfield investment (not acquisition), avoid home-grown mental inertia, and match the pace of their expansion with their capacity to assimilate.

Songs of the Sirens

Some companies think that mergers or acquisitions can put them on the path to greater success. The author points out the warning signs along the path that show when a deal is not a good deal.