Impacts of Exploration and Exploitation on Firm's Performance and the Moderating Effects of Slack: A Panel Data Analysis

The concept of exploration and exploitation has received increasing attention from researchers and managers. Yet, there are few empirical studies on the dynamic effects of exploration and exploitation based on panel data. In addition, the literature is divided in predicting the effects of organizational slack on exploration and exploitation. This study extends the current literature by examining the dynamic effects of exploration and exploitation on the firm's performance. This study further categorizes organizational slack into absorbed and unabsorbed slack, and reveals that each has its own unique moderating effect on exploration and exploitation. This resolves the conflicting view of how organization slack affects exploration and exploitation. Based on a panel data of 125 high technology firms collected using a text mining technique, our analysis reveals a three-stage “horizontal S” relationship between exploration and firm's performance. This study also identifies that absorbed slack facilitates exploitation but impairs exploration, while unabsorbed slack facilitates exploration.

[1]  Constantinos N. Leonidou,et al.  Does financial resource slack drive sustainability expenditure in developing economy small and medium-sized enterprises? , 2017 .

[2]  L. Gómez-Mejia,et al.  Going short-term or long-term? CEO stock options and temporal orientation in the presence of slack , 2016 .

[3]  Changyue Luo,et al.  The moderating effects of slack on the relationship between ambidextrous strategy and performance: evidence from high-tech firms in China , 2016 .

[4]  Yi Liu,et al.  Organizational Learning, Managerial Ties, and Radical Innovation: Evidence From an Emerging Economy , 2016, IEEE Transactions on Engineering Management.

[5]  Robert J. Bloomfield,et al.  Gathering Data for Archival, Field, Survey and Experimental Accounting Research , 2015 .

[6]  Ram Mudambia,et al.  Proactive R&D management and firm growth: A punctuated equilibrium model , 2015 .

[7]  Slack and the performance of state-owned enterprises , 2014 .

[8]  Goutam Chakraborty,et al.  Text Mining and Analysis: Practical Methods, Examples, and Case Studies Using SAS , 2013 .

[9]  M. Tushman,et al.  Organizational Ambidexterity: Past, Present and Future , 2013 .

[10]  Feng-Jyh Lin,et al.  Does technological diversification matter to firm performance? The moderating role of organizational slack , 2013 .

[11]  S. Tarba,et al.  Organizational Ambidexterity and Performance: A Meta-Analysis , 2013 .

[12]  Shan Ling Pan,et al.  How to Balance Sustainability and Profitability in Technology Organizations: An Ambidextrous Perspective , 2013, IEEE Transactions on Engineering Management.

[13]  Justin J. P. Jansen,et al.  Ambidexterity and performance in multiunit contexts: Cross‐level moderating effects of structural and resource attributes , 2012 .

[14]  Mark P. Sharfman,et al.  Legitimacy, Visibility, and the Antecedents of Corporate Social Performance: An Investigation of the Instrumental Perspective , 2011 .

[15]  B. Looy,et al.  Technological Activities and Their Impact on the Financial Performance of the Firm , 2010 .

[16]  Qing Cao,et al.  Unpacking Organizational Ambidexterity: Dimensions, Contingencies, and Synergistic Effects , 2009, Organ. Sci..

[17]  Constantine Andriopoulos,et al.  Exploitation-Exploration Tensions and Organizational Ambidexterity: Managing Paradoxes of Innovation , 2009, Organ. Sci..

[18]  Julian Birkinshaw,et al.  Organizational Ambidexterity: Balancing Exploitation and Exploration for Sustained Performance , 2009, Organ. Sci..

[19]  Glenn B. Voss,et al.  The Effects of Slack Resources and Environmentalthreat on Product Exploration and Exploitation , 2008 .

[20]  Daniel A. Levinthal,et al.  Exploration and Exploitation in Organizational Learning , 2007 .

[21]  Henk W. Volberda,et al.  Exploratory Innovation, Exploitative Innovation and Peformance: Effects of Organizational Antecedents and Environmental Moderators , 2006, Manag. Sci..

[22]  Ken G. Smith,et al.  The interplay between exploration and exploitation. , 2006 .

[23]  Scott W. Geiger,et al.  Exploration and exploitation innovation processes : The role of organizational slack in R & D intensive firms. , 2006 .

[24]  Scott Shane,et al.  When Does Lack of Resources Make New Firms Innovative , 2005 .

[25]  Joseph F. Porac,et al.  Are more resources always better for growth? Resource stickiness in market and product expansion , 2004 .

[26]  C. Moorman,et al.  Tradeoffs in marketing exploitation and exploration strategies: The overlooked role of market orientation , 2004 .

[27]  Justin Tan,et al.  Organizational Slack and Firm Performance During Economic Transitions: Two Studies from an Emerging Economy , 2003 .

[28]  Mary J. Benner,et al.  Exploitation, Exploration, and Process Management: The Productivity Dilemma Revisited , 2003 .

[29]  M. Tushman,et al.  Ambidextrous Organizations: Managing Evolutionary and Revolutionary Change , 1996 .

[30]  I. Nonaka.  A Dynamic Theory of Organizational Knowledge Creation , 1994 .

[31]  Jeffrey R. Edwards,et al.  On the Use of Polynomial Regression Equations As An Alternative to Difference Scores in Organizational Research , 1993 .

[32]  M. Arellano,et al.  Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations , 1991 .

[33]  L. Bourgeois.  On the Measurement of Organizational Slack , 1981 .

[34]  James D. Thompson.  Organizations in Action: Social Science Bases of Administrative Theory , 1967 .

[35]  Jacob Cohen.  A Coefficient of Agreement for Nominal Scales , 1960 .