How to achieve high performance in foreign markets has long been a core question in the international business and strategy field. Researchers have sought to understand the ways to reduce the liability of foreignness and the drivers of competitive advantages of non-native firms in foreign markets (Peng 2004; Zaheer 1995). Despite of decades of efforts, there are still challenges remaining indicated by the fragmentation of answers offered. Theoretically, organizational learning in foreign markets can help firms develop new capabilities and enhance their performance. Yet to date, we still lack of empirical evidence of the performance implication of organizational learning in foreign markets. In this study, we take a learning perspective to investigate whether multinational firms' learning contributes to high performance in foreign markets. We aim to contribute to the literature through examining the effect of organizational learning on foreign subsidiary performance using objective financial performance measure. Moreover, through observing the whole entry sequence of multinational firms from the very beginning in a foreign market, we can develop refined measures of experience including general entry experience, entry specific experience, and exporting experience. Thus, we are able to differentiate the effects of different types of experience on subsidiary performance more accurately. We also examine two levels of learning effects, including learning at parent firm and subsidiary level. Theory and Hypotheses Organizational learning involves the acquisition of knowledge that is useful to the organization. Recently, researchers have adopted the organizational learning perspective and posited that firms make investments in foreign markets not only to exploit their existing specific advantages but also to develop new competitive advantages (e.g., Barkema and Vermeulen 1998; Chang 1995; Shan and Song 1997; Makino et al. 2002; March 1991). Firms can learn from different sources including from their direct experience, from previous decision outcomes, and from observing the experience of other firms. Learning by doing is one of the most important mechanisms of organizational learning. Foreign firms generate and accumulate knowledge from their own entry experience incrementally (Johanson and Vahlne 1977, 1990). Based on the organizational learning theory, we examine two levels of learning of multinational firms. For learning at parent firm level, we develop measures of experience including general entry experience, entry specific experience, and exporting experience and investigate the effects of subsidiary performance. For learning at subsidiary level, we also examine each subsidiary's experience in a host market. Specifically, we hypothesize that H1a: Firms' general entry experience has a positive effect on subsequent subsidiary performance. H1b: As firms' general entry experience increases, its contribution to subsequent subsidiary performance decreases. H2a: Firms' entry specific experience has a positive effect on subsequent subsidiary performance. H2b: As firms' entry specific experience increases, its contribution to subsequent subsidiary performance decreases. H3a: Firms' exporting experience has a positive effect on subsequent subsidiary performance. H3b: As firms' entry experience increases, the contribution of exporting experience to subsequent subsidiary performance decreases. H4: Foreign subsidiaries' experience is positively related to their performance in foreign markets. Methodology We focused on subsidiaries of large U.S. firms operating in China. We firstly compiled a longitudinal dataset consisting of large U.S. firms' sequential entries into China from 1979 to 2002 from a trade magazine titled the China Business Review. We then combined the entry data with the database of annual National Registration for Foreign Invested Enterprises in China.… [ABSTRACT FROM AUTHOR]