exploration and exploitation

Exploration and Exploration and ExploitationExploitation

策略性知識管理策略性知識管理

企博二蔡旻恭企博二蔡旻恭 R48951143R48951143

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The Concepts of The Concepts of Exploration & ExploitationExploration & Exploitation

A central concern of studies of A central concern of studies of adaptive adaptive

processesprocesses is the relation between the exploration is the relation between the exploration

of of new possibilitiesnew possibilities and the exploitation of and the exploitation of old old

certaintiescertainties (in organizational learning). (in organizational learning).

Exploration includes things captured by terms such as Exploration includes things captured by terms such as

search, variation, risk taking, experimentation, play, search, variation, risk taking, experimentation, play,

flexibility, discovery, innovation.flexibility, discovery, innovation.

Exploitation includes such things as refinement, choice, Exploitation includes such things as refinement, choice,

production, efficiency, selection, implementation, production, efficiency, selection, implementation,

execution.execution.

March, 1991, Exploration and Exploitation in Organizational learning, March, 1991, Exploration and Exploitation in Organizational learning, Organization Science, V2, p71.Organization Science, V2, p71.

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They are in terms of (or defined as)They are in terms of (or defined as)

Actions (Behaviors) ?Actions (Behaviors) ?

Capabilities ?Capabilities ?

Norms (Culture, Climate) ?Norms (Culture, Climate) ?

Processes ?Processes ?

Strategies ?Strategies ?

Structures (Functions) ?Structures (Functions) ?

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Exploration implies Exploration implies firm behaviorsfirm behaviors characterized by search, discovery, characterized by search, discovery, experimentation, risk taking and experimentation, risk taking and innovation, while exploitation innovation, while exploitation implies implies firm behaviorsfirm behaviors characterized characterized by refinement, implementation, by refinement, implementation, efficiency, production and selection.efficiency, production and selection.

He & Wong, 2004, Exploration vs. Exploitation: An Empirical Test of the He & Wong, 2004, Exploration vs. Exploitation: An Empirical Test of the Ambidexterity Hypothesis, Organization Science, V15, p481.Ambidexterity Hypothesis, Organization Science, V15, p481.

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Exploration and exploitation require Exploration and exploitation require substantially different substantially different structuresstructures, , processesprocesses, , strategiesstrategies, , capabilitiescapabilities, and , and culturescultures to pursue to pursue and may have different impacts on firm and may have different impacts on firm adaptation and performance (He & Wong, 2004).adaptation and performance (He & Wong, 2004).

Exploration is associated with organic structures, Exploration is associated with organic structures, loosely coupled systems, path breaking, improvisation, loosely coupled systems, path breaking, improvisation, autonomy and chaos, and emerging markets and autonomy and chaos, and emerging markets and technologies.technologies.

Exploitation is associated with mechanistic structures, Exploitation is associated with mechanistic structures, tightly coupled systems, path dependence, tightly coupled systems, path dependence, routinization, control and bureaucracy, and stable routinization, control and bureaucracy, and stable markets and technologiesmarkets and technologies

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The returns associated with exploration The returns associated with exploration are more are more variablevariable and and distant in timedistant in time, , while the returns associated with while the returns associated with exploitation are more exploitation are more certaincertain and and closer closer in timein time (He & Wong, 2004). (He & Wong, 2004).

In other words, explorative firms generate In other words, explorative firms generate larger performance variation by experiencing larger performance variation by experiencing substantial success as well as failure, while substantial success as well as failure, while exploitative firms are likely to generate more exploitative firms are likely to generate more stable performance.stable performance.

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The Concepts of The Concepts of “Balance”“Balance”

Maintaining an appropriate Maintaining an appropriate balancebalance between exploration and exploitation between exploration and exploitation is a primary factor in system survival is a primary factor in system survival and prosperity (March, 1991).and prosperity (March, 1991).

Firms need to achieve a Firms need to achieve a balancebalance between exploration and exploitation between exploration and exploitation to achieve superior performance to achieve superior performance (Tushman and O’Reilly, 1996).(Tushman and O’Reilly, 1996).

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AmbidexterityAmbidexterity refers to the refers to the synchronoussynchronous pursuit of both pursuit of both exploration and exploitation via exploration and exploitation via loosely coupled and differentiated loosely coupled and differentiated subunits or individuals, each of subunits or individuals, each of which specializes in either which specializes in either exploration or exploitation. (Gupta, exploration or exploitation. (Gupta, Smith & Shalley, 2006).Smith & Shalley, 2006).

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Punctuated equilibriumPunctuated equilibrium (or temporal (or temporal cycling) refers to cycling) refers to temporaltemporal rather rather than organizational differentiation than organizational differentiation and suggests that cycling through and suggests that cycling through periodsperiods of exploration and of exploration and exploitation is a more viable exploitation is a more viable approach than a simultaneous approach than a simultaneous pursuit of the two (Gupta, Smith & pursuit of the two (Gupta, Smith & Shalley, 2006).Shalley, 2006).

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Issues of Exploration & Issues of Exploration & ExploitationExploitation

Definitions and connotationsDefinitions and connotations

The central ambiguity regarding the The central ambiguity regarding the definition and implications of definition and implications of exploration and exploitation lies in exploration and exploitation lies in whether the two are distinguished by whether the two are distinguished by differences in thedifferences in the type of learningtype of learning or or by by the presence versus the absence of the presence versus the absence of learninglearning..

Gupta, Smith & Shalley, 2006, The Interplay Between Exploration and Gupta, Smith & Shalley, 2006, The Interplay Between Exploration and Exploitation, Academy of Management Journal, V49, pp693-706.Exploitation, Academy of Management Journal, V49, pp693-706.

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Orthogonality vs. continuityOrthogonality vs. continuity

Are exploration and exploitation Are exploration and exploitation two two ends of a continuumends of a continuum, or , or two different two different and orthogonal aspectsand orthogonal aspects of of organizational behavior?organizational behavior?

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Ambidexterity vs. punctuated Ambidexterity vs. punctuated equilibriumequilibrium

Are these two mechanisms Are these two mechanisms equally equally viableviable, so that an organization can , so that an organization can pick one or the other at will?pick one or the other at will?

Should exogenous or endogenous Should exogenous or endogenous contextual factorscontextual factors drive the drive the choicechoice between the two mechanisms?between the two mechanisms?

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Duality vs. specialization (nested Duality vs. specialization (nested system)system)

Is it logical to predict that, under Is it logical to predict that, under certain conditions, long-term survival certain conditions, long-term survival may be feasible without balance—may be feasible without balance—that is, by dedicating an organization that is, by dedicating an organization or system solely to exploration or or system solely to exploration or solely to exploitationsolely to exploitation.

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He & WongHe & WongH1a: There is a positive interaction H1a: There is a positive interaction effect between explorative and effect between explorative and exploitative innovation strategieson exploitative innovation strategieson firm performance.firm performance.

H1b: The relative imbalance H1b: The relative imbalance (absolute difference) between (absolute difference) between explorative and exploitative explorative and exploitative innovation strategies is negatively innovation strategies is negatively related to firm performance.related to firm performance.

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He & WongHe & Wong

H2: Firms that specialize in explorative H2: Firms that specialize in explorative innovation strategy exhibit larger intragroup innovation strategy exhibit larger intragroup variation in performance, relative to their mean variation in performance, relative to their mean values of performance, than firms that values of performance, than firms that specialize in exploitative innovation strategy.specialize in exploitative innovation strategy.

H3: Ambidextrous firms (scoring high on both H3: Ambidextrous firms (scoring high on both explorative and exploitative innovation explorative and exploitative innovation strategies) exhibit smaller intragroup variation strategies) exhibit smaller intragroup variation in performance, relative to their mean values of in performance, relative to their mean values of performance, than firms that specialize in performance, than firms that specialize in explorative innovation strategy.explorative innovation strategy.

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GreveGreve

H1a: When performance relative to the H1a: When performance relative to the

aspiration level decreases, the rates of aspiration level decreases, the rates of

launching exploration innovations and launching exploration innovations and

exploitation innovations increase.exploitation innovations increase.

H1b: Performance relative to the H1b: Performance relative to the

aspiration level has a stronger effect on aspiration level has a stronger effect on

exploration innovations than on exploration innovations than on

exploitation innovations.exploitation innovations.

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GreveGreve

H2a: When absorbed and unabsorbed H2a: When absorbed and unabsorbed

slack resources increase, the rates of slack resources increase, the rates of

launching exploration innovations and launching exploration innovations and

exploitation innovations increase.exploitation innovations increase.

H2b: Absorbed and unabsorbed slack H2b: Absorbed and unabsorbed slack

resources have a stronger effect on resources have a stronger effect on

exploration innovations than on exploration innovations than on

exploitation innovations.exploitation innovations.

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GreveGreve

H3a: The rate of launching exploration H3a: The rate of launching exploration

innovations decreases with the duration innovations decreases with the duration

since the last exploration innovation.since the last exploration innovation.

H3b: The rate of launching exploitation H3b: The rate of launching exploitation

innovations decreases with the duration innovations decreases with the duration

since the last exploitation innovation.since the last exploitation innovation.

H4: The rate of launching exploration H4: The rate of launching exploration

innovations decreases with the proportion innovations decreases with the proportion

of recent exploitation innovations.of recent exploitation innovations.

exploration and exploitation

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