Superstitious Learning in Corporate Acquisitions

In this paper, we study some of the conditions under which " superstitious learning " phenomena (Levitt and March, 1988) become problematic in organizations, and we identify a set of boundary conditions for these effects. In particular, we argue that the tacit accumulation of experience might exacerbate the problem, but that the heterogeneity in the stock of prior experience, as well as more deliberate learning processes in the form of knowledge articulation and codification, can be beneficial in reducing or even eliminating the effects of superstitious learning. We test these arguments in the context of corporate acquisitions, a challenging task from an organizational learning standpoint due to its high level of causal ambiguity. In a sample of US bank mergers, we find evidence that managers' self-attributions of success in previous acquisitions are negatively related to the performance of the focal merger. Consistent with the theoretical arguments developed, the results also underscore the importance of experience accumulation, experience heterogeneity and knowledge codification as contingencies shaping the consequences of superstitious learning. 2 " Experience enhances both competence and confidence in organizations. The problem is that the two develop asymmetrically over time. " Jim March