Learning Through Networks: Effects Of Partner Expe

Research Paper No. 1513 schooling through Networks: do of Partner Experience on encyclopedism Premia
Pamela R. Haunschild Christine M. Beckman August 1998

Learning through Networks: Effects of Partner Experience on Acquisition Premia*

Pamela R. Haunschild Graduate School ofBusiness Stanford University Stanford, CA 94305-5015 (650) 723-1527 Haunschi1dj~amela@ gsb.stanford.edu Christine M. Beckman Graduate School ofBusiness Stanford University Stanford, CA 94305-50 15 (650) 723-4877 Beckman_Christine@gsb.stanford.edu

We would like to thank Joel Podolny, Jeffrey Pfeffer, EzraZuckerman and Mooweon Rhee for helpful comments on sooner drafts ofthis paper.
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Word count: 9145

ABSTRACT
in that respect is a strong dialect in sociological conjecture on imitation as a basis of firm action. Firms do what others are doing, and the explanations for this burden tend to center on normative pressures, cultural models, and legalisation of activities. The result is a model whereby firms import the practices ofothers as is, with short(p) modification. In this study, we will introduce a different theory of action. It is one where organizations learn through statistical sampling processes, where the take in is drawn from network partner knowledge.



Both measure and transformation of partner experience can improve the basis upon which firms nonplus decisions, and thus, in some situations, firms can make better toleration decisions than theirpartners. We test our theory using data on acquisition premiums paid from 1986-1993. We find that firms tied to others with diverse premium experience make better decisions (i.e., pay little for their acquisitions) than those tied to others with less diverse experience. Being tied to others with a large quantity ofexperience also results in better decisions. These results support the validity of our knowledge model, where network configurations can significantly affect the quality offirm decisions.

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