| dc.description.abstract | The challenge of balancing short-term revenue with long-term growth is a well-known problem in business, literature, and research. When large companies are disrupted, it naturally spurs interest into how this can happen. This has led to many studies being conducted in this area.
One of the classic theories in this field is organizational ambidexterity. The term was first introduced by Duncan (1996) and further developed by March (1991), where he refers to organizational learning and a company’s ability to do exploitation to secure short-term revenue and at the same time perform exploration to ensure future survival and growth.
James March (1991) stated, “The basic problem confronting an organization is to engage in sufficient exploitation to ensure its current viability and, at the same time, devote enough energy to exploration to ensure its future viability.” As a comment to this statement, Michael Tushman and Charles O’Reilly (2013) stated: “The difficulty in achieving this balance is that there is a bias in favor of exploitation with its greater certainty of short-term success.”
March (1991) summarized the problem as confronting the organization to engage in sufficient exploitation and enough energy to explore. While Tushman and O’Reilly (2013) claim a natural bias towards exploitation, Utterback and Abernathy (1975) indicated an evolutionary pattern related to productivity over time.
With this study, we want to explore how valid the comment made by Tushman and O’Reilly is for growth SMEs that have to dedicate time to explore activities to capture market positions and ensure future success.
Our investigation is an exploratory qualitative study of five companies pursuing growth. We will get a deeper insight into each of our five subject Small- and Medium-sized Enterprises (SMEs), through semi-structured interviews to understand how they prioritize exploitation and exploration, what influences their decision, and how they balance exploitation and exploration.
Our findings show that all our sample companies face challenges when balancing exploration and exploitation. In addition, our analysis of the companies' growth- and innovation strategy has identified how their current market position influences their decisions.
Through our research, we have identified there is a difference between SMEs' capabilities to actually balance exploitation and exploration, and their desired balance. There is a clear indication of prioritizing product exploration in a growth phase, contradicting Tushman and O'Reilly's statement of an explicit bias towards exploitation for short-term success. However, their choice of prioritizing product exploration confirms the model of Utterback and Abernathy.
Through our sample companies analysis, we better understand how these companies prioritize between exploitation and exploration to capture and maintain their market position and competitive advantage over time. | |
