Learning from Complexity: Effects of Prior Accidents and Incidents on Airlines' Learning Author(s): Pamela R. Haunschild and Bilian Ni Sullivan Source: Administrative Science Quarterly, Vol. 47, No. 4 (Dec., 2002), pp. 609-643 Published by: Sage Publications, Inc. on behalf of the Johnson Graduate School of Management, Cornell University Stable URL: http://www.jstor.org/stable/3094911 Accessed: 26-02-2015 20:13 UTC Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]. Sage Publications, Inc. and Johnson Graduate School of Management, Cornell University are collaborating with JSTOR to digitize, preserve and extend access to Administrative Science Quarterly. http://www.jstor.org This content downloaded from 128.83.205.78 on Thu, 26 Feb 2015 20:13:56 UTC All use subject to JSTOR Terms and Conditions Learningfrom Using data on accidents and incidents experienced by Complexity:Effects of U.S. commercial airlines from 1983 to 1997, we investi- PriorAccidents and gated variation in firm learning by examining whether firms learn more from errors with heterogeneous or Incidentson Airlines' homogeneous causes. We measured learning by a reduc- Learning tion in airline accident and incident rates, while control- ling for other factors related to accidents and incidents. Pamela R. Haunschild Our results show that heterogeneity is generally better for as in the causes of errors of Texasat Austin learning, prior heterogeneity University decreases subsequent accident rates, producing a deeper, Bilian Ni Sullivan broader search for causality than simple explanations like StanfordUniversity "blame the pilot." The benefits of heterogeneity, howev- er, apply mainly to specialist airlines. Generalist airlines learn, instead, from outside factors such as the experi- ence of others and general improvements in technology. These results suggest a theory of learning across organi- zational forms: complex forms benefit from simple infor- mation, and simple forms benefit from complex informa- tion. The implications of our study for learning theories and work on organizational errors are discussed.? Forall the scientific pizzazz[involved in airlineaccident investi- gations], unravelingthe subtle, complex chain of events lead- ing to aviationdeaths is provingmore elusive than ever. -"Why more plane-crashprobes end in doubt," WallStreet Journal,March 22, 1999 Organizationslike airlinestry to learnfrom experience, under- standing what went wrong so that it won't go wrong next time. But if, as the quote above suggests, the causes are often left in doubt, such learningis likelyto be difficult. Learningis also likelyto vary across firms, despite industry regulationthat should affect all airlinesequally. Investigators of the 2000 Air FranceConcorde crash discovered that British Airways had recommended changes to the Concorde'swater deflector in 1995 but that Air France had not made those changes (Phillips,2000). As Donoghue (1998: 36) explained, "... any safety initiative has an unequal effect on the carriers and becomes an issue to be promoted or fought ... seeking the path that best suits [the airline]individually." Other heavi- ly regulated industries, such as nuclearpower, also show substantialvariance in incident rates among firms (Morrisand Engelken, 1973), which indicates that firms vary in how effectively they learnfrom their experience. Despite much o 2002 by Johnson GraduateSchool, discussion and analysis of aviationerrors (airlineaccidents CornellUniversity. 0001-8392/02/4704-0609/$3.00. and incidents),there has been little work investigatingthe role of organizationallearning and none examiningvariation in learningacross firms in the industry. We would like to thankOzgecan Kocak for help with data collectionand com- Learningfrom experience has been shown to have important ments on earlierversions of this paper. effects on such varied outcomes as Thankyou also to GlennCarroll, Martin manufacturingplant pro- Evans,James March,Daniel Stewart, ductivity(e.g., Argote, Beckman, and Epple, 1990), service EzraZuckerman, and seminarparticipants timeliness (Argoteand Darr,2000), and hotel survival(Baum at Universityof Texasat Austin,Universi- If firms learnfrom then the ty of Toronto,University of Washington, and Ingram,1998). experience, Universityof Wisconsin,University of Cal- attributesof this experience are likelyto affect the rate and iforniaat Irvine,University of Bologna, effectiveness of Some firms have heterogeneous and the 2000 Conferenceon Knowledge learning. and Innovation.This paperwas also sig- experience in that their accidents and incidents ("errors")are nificantlyhelped by the especiallyhelpful caused by a large numberof differentfactors, which are like- and detailedcomments of the ASQ have more homo- reviewersand ChristineOliver, as well as ly to interactin complex ways. Some firms by LindaJohanson's editing. geneous experience, with errorscaused by a small number 609/Administrative Science Quarterly, 47 (2002): 609-643 This content downloaded from 128.83.205.78 on Thu, 26 Feb 2015 20:13:56 UTC All use subject to JSTOR Terms and Conditions of similarfactors. It is likelythat the complexityof priorexpe- riences, as well as characteristicsof the firms themselves, affect how well airlinescan learnfrom that experience. We investigate these issues in the context of airlineaccidents and incidents to explainvariation in learningamong firms in the airlineindustry. Accordingto the NTSB(2001) Code of FederalRegulations (49CFR830.2,p. 1195), an accident "means an occurrence ... in which any person suffers death or serious injury,or in which the aircraftreceived substantialdamage." An incident is "an occurrence other than an accident, which affects or could affect the safety of operations."Accidents and inci- dents are the errorexperiences from which airlineshave the potentialto learn. EFFECTS OF PRIOR EXPERIENCEON LEARNING In the literatureon organizationallearning there is a large body of work on the learningcurve. The learningcurve is an empiricalfinding showing that, in general, experience pro- duces improvement.Early empirical work on the learning curve showed that the log of unit costs tends to decrease lin- early with the log of cumulativeproduction volume. So, for example, cumulativeproduction experience tends to lower costs in shipbuildingand automotive production(Argote and Epple, 1990), nuclearpower plant production(Zimmerman, 1982), and coal generation (Joskow and Rose, 1985). More recent work has moved away from a focus on cost reduction and productivityimprovement to other outcomes of learning. These studies have shown that experience improves cus- tomer service and productquality (Darr, Argote, and Epple, 1995; Lapre,Mukherjee, and VanWassenhove, 2000) and increases the survivalrates of hotels (Ingramand Baum, 1997; Baum and Ingram,1998) and banks (Kimand Miner, 2000). In the context of airlinesand their errors,it may be that air- lines learnfrom errorexperience and are able to improveper- formance over time, reducingsubsequent errors(i.e., acci- dents and incidents). If we look at the airlineindustry over long time periods, this seems to be the case. Figure1 plots the accident rate (accidents per 100,000 hours flown) for all U.S. airlinesfrom 1955 to 1997 and exhibits a characteristic learningcurve, i.e., as experience accumulates with the pas- sage of time, the errorrate declines. When individualairlines' accident rates are brokenout, as they are in table 1 for some of the largerU.S. airlines,we see the same general decrease in accidents over time as in figure 1, but there is also a fairamount of varianceacross air- lines. Forexample, from 1957 to 1986, AmericanAirlines had an average of 10.3 accidents per milliondepartures and US Airhad 6.6. Variationin airlineerror rates could come from many sources. One obvious source is the characteristicsof the individualairline, e.g., whether it is large or small, the age of its fleet, characteristicsof its corporateculture, its man- agement team, and its trainingprocedures. Another possible source of variation,however, is differences in the characteris- tics of the accidents and incidents experienced by these dif- ferent airlines.Because experience affects organizational 610/ASQ, December 2002 This content downloaded from 128.83.205.78 on Thu, 26 Feb 2015 20:13:56 UTC All use subject to JSTOR Terms and Conditions Learningfrom Complexity Figure 1. U.S. airline accident rates for all airlines by time period.* 20 18 ! , 16 3 0 o0 a CO 'a 12 < 4 2 - 0 1957-60 1961-65 1966-70 1971-75 1976-80 1981-85 1986-90 1991-95 1996-00 Cumulative IndustryExperience * Source: NTSB, FAAFlight Statistics Reports, various years. learning,different types of experiences are likelyto produce variationin learningrates. One source of differences in expe- rience is whether that experience has homogeneous or het- erogeneous causes. Homogeneity and heterogeneity of experience have been shown to affect learningabout mergers and acquisitions (Beckmanand Haunschild,2002), and heterogeneity may also affect an organization'sability and/or motivationto learnfrom errors such as accidents