Organisational learning as a mediator in the host-home country similarity–international firm performance link: the role of exploration and exploitation

Abstract

Purpose This study aims to shed light on the lack of understanding and previous mixed results regarding why and how some internationalised firms take advantage of host-home country similarity (HHS) while others do not. Design/methodology/approach Direct and mediating hypotheses are examined through an empirical investigation of 156 CEOs in internationalised Spanish companies, using structural equation modelling validated by factor analysis. Findings The results suggest that exploitation (EI) and exploration (ER) constitute important learning mechanisms that impact on the liability of foreignness when internationalising a business. In particular, the positive influence that HHS has in international firm performance (IP) depends on both exploitative and exploratory learning. Practical implications This research adds insights into the importance of two of the main components of organisational learning (i.e. ER and EI) as mediators of the HHS and IP relationship, which can help senior managers or business owners make consistent decisions by matching potential international market locations with firm learning factors. Originality/value This study clarifies contradictory theoretical assertions and mixed empirical results about how HHS impacts on international performance. In particular, by responding to recent calls for research, this study has shown that organisational learning is a key component in the aforementioned link where ER and EI positively mediate this relevant relationship.