Path-Dependent Firm Growth and the Paradox of Deepening Expansion Experiences

Firms have two growth orientations: resource deepening and broadening expansions. The former type of growth refers to resource deepening expansions that result from firms’ specialization in certain production resources, whereas the latter relates to resource broadening expansions that enhance firms’ repertories of production resources. The growth orientation decision has an important influence on how firms explore markets and utilize experience-based knowledge. The purpose of this study is to conduct a joint analysis of the experiential effects on the likelihood and success of resource broadening expansions. Drawing upon the literature on organizational learning, exploration, and the pace of organizational change, we propose and test the paradox of deepening expansion experiences: deepening expansion experiences decrease the likelihood of resource broadening expansions but increase the rates of success. We analyzed the longitudinal procurement records of airplanes by airlines and the results support this paradox.