Learning by doing in international investment: the effect of previous investment experience

Previous investment experience constitutes an important factor in facilitating subsequent cross-border investment decision-making. Existing literature has paid more attention to the effects of macro variables on investment outcomes, while firm-level idiosyncratic factors have been less studied. Based on deal-level data, this paper finds that country-specific experience increases the average value of subsequent investments by 0.39%, whereas region-specific experience shows no significant effect. One channel is that experience reduces perceived institutional distance and enhances confidence; another channel is that experience encourages the building of industrial linkages and economies of scale. It is recommended that firms use experience strategically, but not as a substitute for risk analysis.