It's All in the Name: Failure-Induced Learning by Multiunit Chains

Abstract

We examine factors leading multiunit chains to adopt a common naming strategy, that is, naming components in a manner that identifies them with each other and the overall chain, rather than a local naming strategy that identifies a chain's components with their locations but not each other. Because chains' naming strategies have been shown to be critical to their success, we examine the effects of component failures on naming strategies. We advance organizational and interorganizational learning processes to explain chains' adoption of local naming strategies, which stress local adaptation, or common naming strategies, which emphasize standardization. In contrast to past research emphasizing learning from success, we focus on learning from the failure of strategy, specifically, the failure of a chain's own and other chains' commonly and locally named components. Two fundamental results emerge from our analysis of Ontario nursing home chains' naming strategies from 1971 to 1996. One is that nursing home chains learned from their own and others' failures, and the second is that the chains learned less from failures when they had a historical investment in the failing strategy.