Managing the tensions between exploration and exploitation: The role of time

• Published date: 01 September 2018
• Author: T. Russell Crook,Aaron F. Mckenny,Blake D. Mathias
• DOI: http://doi.org/10.1002/sej.1287
• Date: 01 September 2018

RESEARCH ARTICLE

Managing the tensions between exploration

and exploitation: The role of time

Blake D. Mathias

1*

| Aaron F. Mckenny

2*

| T. Russell Crook

3

1

Department of Management &

Entrepreneurship, Kelley School of Business,

Indiana University, Bloomington, Indiana

2

Department of Management, UCF College of

Business Administration, Orlando, Florida

3

Department of Management & Boyd Center

for Business and Economic Research, Haslam

College of Business, 411 Stokely Management

Center, University of Tennessee –Knoxville,

Knoxville, Tennessee

Correspondence

Aaron F. Mckenny, Department of

Management, UCF College of Business

Administration, PO Box 161400, Orlando, FL

32816-1400.

Email: aaron.mckenny@ucf.edu

Research Summary: Organizational ambidexterity reflects an orga-

nization’s capacity to balance the pursuit of exploration and exploi-

tation. Although the role of time has been central to ambidexterity

theory, studies incorporate time in myriad ways, leading to an

unclear understanding of how different aspects of time influence

the relationship between ambidexterity and performance. We con-

duct a meta-analysis of 52 studies involving more than 13,000

organizational observations and find that the performance effects

of ambidexterity are stronger among older firms and firms that

simultaneously balance exploration and exploitation throughout

the organization. However, we also find that the ambidexterity-

performance relationship is weaker when ambidexterity is mea-

sured dynamically and when linked to long-term performance.

Managerial Summary: Although academics have long espoused that

firms should balance investments between exploration and exploi-

tation activities because doing so improves firm performance, little

research has explicitly modeled the role of time in this balance.

We combined all known evidence to assess the role of time on

balancing and performance. The two key takeaways for entrepre-

neurs and managers are that, on average, “balancing”leads to

stronger financial performance for (a) older organizations and

(b) firms that simultaneously balance activities throughout the

organization. Managers may not see the strongest benefits from

such a balance when attempting to influence long-term perfor-

mance or when this balance occurs at different times or places

inside the organization.

KEYWORDS

ambidexterity, exploitation, exploration, meta-analysis,

performance, time

*The first two authors contributed equally to this manuscript and are listed in alphabetical order.

Received: 20 July 2015 Revised: 29 August 2017 Accepted: 13 September 2017 Published on: 27 February 2018

DOI: 10.1002/sej.1287

Copyright © 2017 Strategic Management Society

316 wileyonlinelibrary.com/journal/sej Strategic Entrepreneurship Journal. 2018;12:316–334.

1|INTRODUCTION

Understanding firms’efforts to identify new opportunities (exploration) and leverage existing opportunities (exploi-

tation) to attain superior performance has played a central role in strategic entrepreneurship research (Hitt, Ireland,

Camp, & Sexton, 2001; Ireland, Hitt, & Sirmon, 2003; Mihalache, Jansen, Van Den Bosch, & Volberda, 2014; Sirén,

Kohtamäki, & Kuckertz, 2012). Theory suggests firms that balance exploration and exploitation—called “ambidex-

trous”—tend to outperform other firms without this capability (March, 1991). Nevertheless, the relationship

between ambidexterity and firm performance is complex (Raisch & Birkinshaw, 2008). For example, some studies

have found a negative (Lin, Yang, & Demirkan, 2007) or curvilinear (Yang & Atuahene-Gima, 2007) relationship

between ambidexterity and firm performance. Other studies have found that the relationship may be influenced by

the type (Katila, Chen, & Piezunka, 2012) and structure (Jansen, Simsek, & Cao, 2012) of the focal firm.

One source of complexity in organizational ambidexterity (hereafter ambidexterity) and its relationship with firm

performance is the pervasive role of time (e.g., Allison, McKenny, & Short, 2013; Venkatraman, Lee, & Iyer, 2007).

Time is a complex and multifaceted phenomenon in strategic entrepreneurship research (Carr, Haggard, Hmieleski, &

Zahra, 2010; George & Jones, 2000) and has played a central role in ambidexterity theory. Indeed, time is at the

heart of several key decisions managers must make when formulating and implementing an ambidextrous strategy

and, accordingly, “theorists should be encouraged to think about whether their theoretical effects vary over time,

either because other time-dependent variables are theoretically important or because the theoretical effect is unsta-

ble for some reason”(Whetten, 1989, p. 492). First, managers must determine whether exploration and exploitation

strategies will be pursued simultaneously or sequentially (e.g., Adler et al., 2009; Gibson & Birkinshaw, 2004). Sec-

ond, managers must determine whether the balance struck between exploration and exploitation should remain the

same over time or whether the balance should be adjusted to accommodate environmental changes (e.g., Patel,

Messersmith, & Lepak, 2013; Simsek & Heavey, 2011). Third, managers must assess the performance of their ambi-

dextrous strategy in terms of short- or long-term performance (e.g., Raisch & Birkinshaw, 2008). Finally, managers

must decide when to implement an ambidextrous strategy (e.g., Sirmon, Hitt, & Ireland, 2007). Thus, there is reason

to believe that the ambidexterity-performance relationship may vary based on temporal factors.

Despite the potential importance of time to the pursuit of an ambidextrous strategy, most studies limit their

scope with respect to the influence of time in understanding the performance implications of ambidexterity. For

instance, few studies examine how firms’selection of either simultaneously or sequentially pursuing exploration and

exploitation influences the relationship of ambidexterity with firm performance. Similarly, while many studies control

for firm age, research has not systematically examined when an ambidextrous strategy may have greater firm per-

formance implications—at early or later venture stages. Thus, the centrality of time to ambidexterity theory and

practice, combined with our lack of understanding of how time affects the ambidexterity-firm performance relation-

ship, suggests a gap in existing research. To begin closing this gap, we meta-analyze studies and investigate how

time impacts this relationship.

Meta-analysis is considered the best available tool to aggregate effects from existing research (Combs, Ketchen,

Crook, & Roth, 2011). Although meta-analyses are used frequently to aggregate and summarize the findings of well-

tested hypotheses (e.g., high performance work practices to performance: Combs, Liu, Hall, & Ketchen, 2006;

resources to firm growth: Nason & Wiklund, 2018), they also enable the testing of theory when individual studies

examine a single aspect of a phenomenon, but where there is variability in how this aspect is treated across studies.

For example, Crook, Ketchen, Combs, and Todd (2008) used meta-analysis to show how resource-based perfor-

mance advantages are strongest when performance measures are not affected by potential appropriation from firm

stakeholders. We use meta-analysis similarly by examining how key temporal factors affect the relationship between

ambidexterity and firm performance.

This study makes three contributions to the strategic entrepreneurship literature. First, we theorize how balan-

cing exploration and exploitation either sequentially or simultaneously influences the performance consequences of

ambidexterity. We find greater benefits accrue to firms that develop an ambidexterity strategy of simultaneous

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