Balancing exploratory and exploitative adaptation: Organizational and environmental dynamics

Juha Uotila

Research output: ThesisDoctoral ThesisCollection of Articles

Abstract

Exploration and exploitation are considered the two key processes in organizational adaptation and strategic renewal, and balancing these two potentially conflicting forms of adaptive activity has been a central issue in the management literature. However, there is still considerable debate and lack of clarity regarding how exploration and exploitation should be balanced in organizations and how different contextual dynamics might influence the balance between the two processes. In this dissertation, I address this gap through four separate analyses, which are presented in the form of four independent essays. In the first essay, I empirically examine the exploration–exploitation tradeoff using a panelsample of S&P 500 corporations for the years 1989–2004. I find that relative exploration displays an inverted U-shaped relationship with the financial performance of the organization and that this relationship is positively moderated by industry technological dynamism. In the second essay, I examine exploration and exploitation as two components of organizational adaptability using a formal simulation model and find that environmental complexity and turbulence impose increasing demands on both exploratory and exploitative adaptation. In the third essay, I use a similar simulation model to examine how exploration and exploitation can be balanced over time. I find that either turbulence or complexity may generate a punctuated equilibrium pattern, whereas ambidexterity is the preferred mode in stable and simple or highly complex and highly turbulent environments. Finally, in the fourth essay, I apply the organizational search framework to technological standard setting under network effects. By modeling organizations as boundedly rational actors conducting coevolutionary technological search, I find that while coordination can be used to exploit high-quality technological solutions by driving their acceptance as de facto standards, it must be balanced with sufficient diversity to allow for the exploration of potentially superior solutions. This dissertation contributes to the organizational adaptation literature by empirically corroborating and theoretically extending key concepts in the literature on exploration and exploitation. I test and advance the exploration–exploitation theory by investigating the dynamics of the exploration–exploitation balance and the influence of contextual factors onthis balance. I also contribute to the standard setting literature by showing that when search dynamics are taken into account, an appropriate balance between exploration and exploitation is necessary for optimal social efficiency in such an interorganizational context.
Translated title of the contributionOrganisaatio- ja toimintaympäristödynamiikat uuden luomisessa ja vanhan hyödyntämisessä
Original languageEnglish
QualificationDoctor's degree
Awarding Institution
  • Aalto University
Supervisors/Advisors
  • Maula, Markku, Supervising Professor
  • Maula, Markku, Thesis Advisor
  • Keil, Thomas, Thesis Advisor
Publisher
Print ISBNs978-952-60-4680-8
Electronic ISBNs978-952-60-4681-5
Publication statusPublished - 2012
MoE publication typeG5 Doctoral dissertation (article)

Keywords

  • exploration
  • exploitation
  • adaptation
  • balance
  • environmental dynamics
  • organizational adaptation

Fingerprint

Dive into the research topics of 'Balancing exploratory and exploitative adaptation: Organizational and environmental dynamics'. Together they form a unique fingerprint.

Cite this