Organizational geography, experiential learning and subsidiary exit: Japanese foreign expansions in China, 1979-2001

We examine how experiential learning and vicarious learning, as tied to a subsidiary's organizational geography, influence the exit rates of Japanese subsidiaries located in China. We find that exit rates were lower for subsidiaries that were established geographically proximate to the prior expansions of industry peers from Japan. Exit rates were also lower for subsidiaries established by firms with experience in similar product markets in China. Exit rates were greater, however, when a parent firm had substantial experience outside the product market of the current expansion. Importantly, the influence of a subsidiary's geographic proximity to its peers on its exit rate is contingent on whether its parent firm had prior experience inside or outside the product market of the new expansion.