ABSTRACT
March’s seminal study (1991) distinguishes between exploration and exploitation of knowledge within a firm. He defines exploration of knowledge as experimentation with new alternatives and the creation of new capabilities by pursuing fundamental research, experimentation and search. Furthermore, he refers (in the context of exploitation) to the use of existing resources mainly to extend a firm’s knowledge portfolio by standardization, scaling and refinement. His research has led several scholars from diverse research fields to apply these concepts. Studies have grown out of this with a special focus on strategic management (e.g. He and Wong, 2004; Uotila et al., 2009); alliances (e.g. Im and Rai, 2008; Lin et al., 2007); technology sourcing and organizational design (e.g. Andriopoulos and Lewis, 2009; Lubatkin et al., 2006; O’Reilly and Tushman, 2004); and innovation management (e.g. Belderbos et al., 2010; Benner and Tushman, 2003; Jansen et al., 2006; Mudambi and Swift, 2014). Although March (1991) describes a trade-off between the two concepts, more recent studies have found that firms are more successful when they focus on ambidextrous innovation strategies that pursue exploration and exploitation at the same time (e.g. Gibson and Birkinshaw, 2004; Grover et al., 2007; O’Reilly and Tushman, 2004). Hence, firms, especially those in high-technology industries, need to balance their exploration and exploitation strategies (e.g. Kim et al., 2012; Lavie et al., 2011; Molina-Castillo et al., 2011). However, there is less agreement amongst scholars on the question of how to balance exploration and exploitation. Some argue that firms should focus on one strategy and dedicate a minimum of their resources to the other (e.g. Gibson and Birkinshaw, 2004; Levinthal and March, 1993). Others claim that a relative imbalance between the two innovation strategies negatively affects firm performance and firms should dedicate equal resources to exploration and exploitation (e.g. Grover et al., 2007; He and Wong, 2004). Furthermore, longitudinal empirical studies on a balancing strategy in literature are scarce (Raisch et al., 2009). Belderbos et al. (2010) find an inverted U-shaped relationship between firms’ increasing attention to exploration and financial performance but failure to analyse innovation success factors. Based on these considerations, the notion emerges that ambidexterity enables a global management of creativity
in the sense that firms are able to switch between and balance exploration and exploitation. This leads us to the research question: what is the optimal balance between exploration and exploitation?
