When Experience Hurts - Experiential learning, perceived task homogeneity and the confidence trap
Abstract
Experience is a principal source of knowledge and an important antecedent to organizational capabilities. At the same time however, the accumulation of experience increases an organization's confidence in its own abilities and confidence and competence may develop asymmetrically over time. We argue that when this occurs, the magnitude of the stock of accumulated experience is likely to correlate negatively with performance as the organization finds itself in a competence trap. We develop a contingency model in which perceived task characteristics (and task homogeneity in particular), act as important determinants of how confidence evolves relative to competence. They are thus moderators of the experience-performance relationship. We empirically test the corresponding theoretical argument in the context of a sample of 1,134 leveraged buyouts and find strong evidence that perceived task homogeneity determines whether experience benefits or hurts the performance of these types of acquisitions.