Performance implications of incremental transition and discontinuous jump between exploration and exploitation

• DOI: http://doi.org/10.1002/smj.3119
• Date: 01 June 2020
• Author: Jingoo Kang,Sang‐Joon Kim
• Published date: 01 June 2020

RESEARCH ARTICLE

Performance implications of incremental

transition and discontinuous jump between

exploration and exploitation

Jingoo Kang

1

| Sang-Joon Kim

2

1

Nanyang Technological University, Singapore

2

Ewha Womans University, Seoul, South Korea

Correspondence

Sang-Joon Kim, Ewha Womans

University Rm 504, Ewha-Shinsegae

Building 52 Ewhayeodae-gil, Seodaemun-

gu Seoul 120-750, Korea.

Email: s.kim@ewha.ac.kr

Abstract

Research Summary: Literature suggests that firms

may approximate ambidexterity over time by alternat-

ing between periods of exploration and exploitation.

We theorize and empirically test performance implica-

tions of two types of temporal transition between explo-

ration and exploitation and their boundary conditions.

We find that a discontinuous jump has a negative effect

on firm performance while an incremental transition

has a positive effect. We also find that the role of firm

resources and particularly that of non-scale-free

resources is critical in shaping the performance effects

of the two types of temporal transition. Our findings

indicate that the two types of temporal transition have

distinct advantages and disadvantages.

Managerial Summary: Firms need to make use of old

ideas and search for new ideas to remain competitive.

We argue that firms take different approaches to

achieve this goal. We find that firms that alternate

between old and new ideas in an incremental and con-

tinuous manner perform better than firms that switch

abruptly between old and new ideas. We also find that

the performance effects of the two approaches are more

pronounced for firms with limited resources. This find-

ing warns managers of the danger of an abrupt and

Received: 6 April 2018 Revised: 1 November 2019 Accepted: 4 November 2019 Published on: 24 March 2020

DOI: 10.1002/smj.3119

Strat. Mgmt. J. 2020;41:1083–1111. wileyonlinelibrary.com/journal/smj ©2020 John Wiley & Sons, Ltd. 1083

discontinuous jump between old and new ideas, espe-

cially for firms with limited resources.

KEYWORDS

ambidexterity, exploration and exploitation, firm performance, firm

resources, temporal transition

1|INTRODUCTION

Balancing between exploration and exploitation is essential for a firm's survival and competitive

advantage (March, 1991; Tushman & O'Reilly, 1996). Strategy and organization learning

scholars have debated over how firms balance exploration and exploitation and how such

balancing affects firm performance. The two most widely discussed approaches in the literature

are ambidexterity (i.e., simultaneous balancing) and a temporal transition (Gupta, Smith, &

Shalley, 2006; Raisch & Birkinshaw, 2008; Raisch & Tushman, 2016; Tushman & O'Reilly, 1996;

Zimmermann, Raisch, & Birkinshaw, 2015). Ambidexterity indicates that firms engage in explo-

ration and exploitation simultaneously (Raisch, Birkinshaw, Probst, & Tushman, 2009). In con-

trast, a temporal transition indicates that firms alternate between exploration and exploitation

over time (Nickerson & Nickerson & Zenger, 2002). These two approaches have often been con-

sidered alternative solutions for balancing exploration and exploitation (Gupta et al., 2006).

Recent studies, however, suggest that it may be overly simplistic and unrealistic to consider

ambidexterity and a temporal transition as mutually exclusive alternatives (Lavie & Rosenkopf,

2006; Lavie, Stettner, & Tushman, 2010; Luger, Raisch, & Schimmer, 2018; Raisch et al., 2009;

Raisch & Tushman, 2016; Rothaermel & Deeds, 2004). These studies observe that firms gradu-

ally and progressively change their focus between exploration and exploitation over time.

According to this perspective, a temporal transition approach involves a series of incremental

transitions between varying combinations of exploration and exploitation over time. Therefore,

firms essentially remain ambidextrous (i.e., engage in exploration and exploitation simulta-

neously) even as they engage in dynamic adaptation between exploration and exploitation.

These recent studies suggest that ambidexterity and a temporal transition are not mutually

exclusive alternatives. Instead, firms integrate the two approaches to achieve a dynamic balance

between exploration and exploitation over time.

Despite the conceptual appeal and empirical evidence supporting this integrative perspec-

tive, other studies describe temporal transition as temporal separation between exploration and

exploitation (Gupta et al., 2006; Mudambi & Swift, 2014; Swift, 2016). This conceptualization

illustrates a temporal transition as discontinuous jumps between exclusive periods of explora-

tion and exploitation (Gupta et al., 2006; Mudambi & Swift, 2014; Swift, 2016). According to this

perspective, ambidexterity and a temporal transition are separate and mutually exclusive con-

cepts. The idea of temporal separation is rooted in the punctuated equilibrium theory

(Burgelman, 2002; Romanelli & Tushman, 1994) and has been incorporated in modeling

research on exploration and exploitation using a multi-armed bandit model (Lee & Puranam,

2016; Posen & Levinthal, 2012). Some recent studies also provide empirical evidence that is con-

sistent with the idea of a temporal transition as discrete and discontinuous jumps between

exploration and exploitation (Mudambi & Swift, 2014; Swift, 2016). Therefore, viewing a tempo-

ral transition approach as temporal separation has some theoretical and empirical validity.

1084 KANG AND KIM