Double dealing: the influences of diverse business processes on organizational ambidexterity.

Author:Tinoco, Janet K.
 
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INTRODUCTION

Organizational ambidexterity, defined as the ability to simultaneously pursue exploration and exploitation (Adler et al., 2009; Raisch & Birkenshaw, 2008; Tushman & O'Reilly, 1996), continues to draw interest from both the academic and practitioner communities as a viable solution to sustainable competitive advantage and a key element of organizational renewal in face of environment change (Danneels, 2002). Due to naturally occurring inherent tensions between exploration and exploitation, firms frequently find ambidexterity too challenging and often strategically embed themselves in either extreme, severely reducing their performance (e.g., March, 1991; Tushman & O'Reilly, 1996). The ability for an organization to be ambidextrous is not effortless, but is nurtured with focused leadership and direction in order to overcome the natural inclination for inertia and path-dependence (e.g.,Tushman & O'Reilly, 1996).

Raisch & Birkenshaw (2008) summarize prior research on organizational ambidexterity, highlighting that past efforts have effectively examined the influences of structure (e.g., Duncan, 1976), context (e.g., Gibson & Birkenshaw, 2004), and leadership (e.g., Smith & Tushman, 2006) on firm achievement. But, O'Reilly & Tushman (2008: 200) argue that the underpinning of ambidexterity is much more. "We do not believe that ambidexterity is rooted in an individual's ability to explore and exploit as suggested by Gibson & Birkenshaw (2004); nor is ambidexterity simply a matter of organizational structure .... Rather, as a dynamic capability, ambidexterity embodies a complex set of routines," that management must tradeoff and balance for ambidexterity to occur. It follows that routines or business processes wield a significant influence on the ability for firms to achieve organizational ambidexterity. Yet, there is a significant lack of research addressing routines or business process influences on exploration and exploitation. This perilous lack of research suggests that academicians and practitioners alike would benefit from empirical inquiry into a process-based path into organizational ambidexterity.

Recognizing that organizational ambidexterity spans across a wide range of critical business areas (Adler et al., 2009), this research seeks to expand upon prior efforts in operations management, innovation, and strategy and explores answers to the following questions: How do naturally opposing business processes in operations management and product development aid corporations in achieving organizational ambidexterity? Additionally, what specific influence does operations management, examined herein as quality process management and supplier channel bonding, have on innovations in product and production process? The answers to these questions not only directly respond to O'Reilly & Tushman's (2008) conceptual idea that processes influence ambidexterity, but also allows for prescriptives to managers on how to "engage and execute innovation in a way that balances countervailing forces" as suggested by Gopalakrishnan, Kessler, and Scillitoe (2010: 274).

Specifically, the author analyzes operations management and corporate entrepreneurship by examining business processes across the R&D/engineering and operations disciplines in a manufacturing context. In this research exploration is defined as an innovation strategy that encompasses those decisions and activities aimed at entering or creating new product-market domains with radical product innovation while exploitation is defined as an innovation strategy that encompasses those decisions and activities aimed at improving existing product-market positions with incremental product innovations or production process innovations (e.g., He & Wong, 2004). For those firms attempting both exploration and exploitation in innovation, this exploratory study seeks to understand the nature and implications of the entrepreneurial processes inherent in product development and the efficiency and effectiveness processes inherent in operations management as they co-exist in high technology manufacturing organizations. With the knowledge of business process impacts on each of the product and process innovation strategies, one can provide prescriptives to firms as to how to successfully build ambidexterity based on business process implementation.

This paper proceeds as follows. First, a review of the relevant literatures in exploration and exploitation and business processes is presented. Next, a conceptual model and hypotheses are described. Data collection and research methods are then presented. Finally, discussion, implications, and avenues for future research are outlined.

THEORETICAL FOUNDATIONS AND FRAMEWORK OF ANALYSIS

Exploration and exploitation

This study defines radical product innovation as a new product that incorporates a large new body of technical knowledge. It disrupts the current technological trajectory and has been described as explorative by several research streams (e.g., Abernathy & Clark, 1985, Tushman & Anderson, 1986; Tushman & Smith, 2002). Incremental product innovation is defined as a new product that incorporates relatively minor changes in technology or is a minor adaptation of existing products (e.g., Tushman & Smith, 2002). It involves refining, improving, and exploiting an existing firm technological trajectory. A production process innovation is a new system of process equipment, work force, task specifications, material inputs, and work and information flows that are employed to produce a product or service. In past life cycle research, it has been viewed as exploitative in nature (Utterback & Abernathy, 1975). Exploitation in manufacturing can include improvements in production equipment, process technologies, and operational practices (Jayanthi & Sinha, 1998).

In the current study three theoretical perspectives are reviewed for insight into firm exploration and exploitation: organizational learning, population ecology, and evolutionary economics. Although different in their theoretical bases, these three research streams essentially agree that exploration and exploitation are deeply different.

Organizational learning theorists examine the dynamic friction between exploitation and exploration, arguing that there is a fundamental trade-off between explorative and exploitative strategies, that is, firms typically choose one over the other, leading to "refinement of an existing technology" or "the invention of a new one" (March, 1991: 72). Availability of resources and established organizational structures, cultures, and processes often restrict firms in their strategic selection (March, 1991).

While it is more common for exploitation to drive out exploration, organizations create heightened exploration by a "dynamic of failure" (Levinthal & March, 1993). If failure in exploration leads to more exploration which subsequently fails, a dynamic of unending failure is set and difficult to break (Levinthal & March, 1993). This notion is further exemplified in the work by McCrea and Betts (2008) who found that the majority of firms did not learn from their innovation failures, and therefore did not change their initial strategies. Emphasis of both experimentation and exploitation, directed toward achieving ambidexterity, will preclude or reduce the detrimental impact of the dynamic of failure and excessive exploration.

Abernathy & Utterback (1978) proposed that efficiency and innovation are diametrically opposed. Similarly, economics research analyzes the inherent tension between exploitation and exploration via efficiency arguments with respect to search processes, categorizing efficiency as static or dynamic. Statically efficient organizations typically display efficiencies in production and incremental product improvements while dynamically efficient organizations display efficiencies in new product development and new technology (Ghemawat & Costa, 1993).

Exploration and exploitation is also characterized as fundamentally different search modes (March, 1991). Organizational search contributes to the learning process by which firms endeavor to solve problems (Katila & Ahuja, 2002). Local search is defined as the "behavior of any firm or entity to search for solutions in the neighborhood of its current expertise or knowledge" (Rosenkopf & Nerkar, 2001, p. 288). Conversely, distant search is the behavior of a firm or entity to search for solutions outside the neighborhood of its current expertise or knowledge (e.g., Rosenkopf & Nerkar, 2001).

Population ecologists frame exploration and exploitation in terms of variation and selection. Selection of forms, routines, and practices is essential for survival, but so is the generation of variation through new forms, routines, and practices (March, 1991). The population ecology perspective states that structural inertia may inhibit established firms in their flexibility and rapid adaptability to dynamic environments (Hannan & Freeman, 1977; Sorensen & Stuart, 2000). This "liability" manifests in low organizational exploration (Baum & Amburgey, 2002). Regarding the apparent dichotomy of high production efficiency or high rate of radical innovation, population ecology argues that certain types of firms (those that are highly innovative versus those that are highly efficient) have different survivability chances and performance depending on stage of life cycle and environmental conditions (Hannan & Freeman, 1977).

Evolutionary economics also draws on structural inertia as a factor in exploration versus exploitation, but strengthens the notion of routines. Existing organizations have an advantage over younger organizations in that it is easier to continue existing routines (exploitation) than to create new ones (exploration) or borrow old ones (Nelson & Winter, 1982). Yet, established routines may also have a certain amount of inertia associated with them, that is, a firm's actions may be...

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