Jaeho Choi, PhD Candidate, The Wharton School
Abstract: A choice dilemma faced by innovative firms is whether to invest in a novel opportunity that they had not experienced before. Consider, for instance, a tech firm that considers entry into a new technology domain and is provided with an opportunity to acquire a rising startup in such domain. Should the firm attempt to acquire the startup before the opportunity window closes? Or should the firm simply forego the opportunity, given that the firm has never acquired a startup of the same type before? If the firm had experience acquiring a company in a related but different industry, to what degree should the strategist reflect on the prior experience and apply the lessons to the new decision? Such a choice situation, in which one has to predict the outcome of a previously unseen case, can be viewed as a problem of generalization that has been the central subject of inquiry in related academic disciplines but one that has not been closely examined in strategic management and innovation research. This study aims to highlight the generalization problem as a core challenge in organizational learning and strategic decision-making and explore how decision-makers may address this problem via different learning and choice strategies.