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The Multifaceted Nature of Exploration and Exploitation: Value of Supply, Demand, and Spatial Search for Innovation

Author

Listed:
  • Jatinder S. Sidhu

    (Department of Strategic Management & Business Environment, Rotterdam School of Management, Erasmus University, P.O. Box 1738, 3000 DR Rotterdam, The Netherlands)

  • Harry R. Commandeur

    (Department of Applied Economics, Erasmus School of Economics, Erasmus University, P.O. Box 1738, 3000 DR Rotterdam, The Netherlands)

  • Henk W. Volberda

    (Department of Strategic Management & Business Environment, Rotterdam School of Management, Erasmus University, P.O. Box 1738, 3000 DR Rotterdam, The Netherlands)

Abstract

In this paper, exploration and exploitation are conceptualized in terms of a nonlocal-local search continuum in three-dimensional supply, demand, and geographic space. Using cross-sectional data from a wide range of manufacturing industries, we develop and validate an operational measure of the exploration-exploitation concept. In line with theory-based arguments, our analysis suggests that the value of supply-side, demand-side, and spatial exploration and exploitation is contingent on the environment. While boundary-spanning supply-side search is found to be positively associated with innovation in more-dynamic environments typical of the entrepreneurial regime phase of technology evolution, such exploration appears to hurt innovation in less-dynamic environments. In a reverse fashion, while boundary-spanning demand-side search is found to be favorably associated with innovation in less-dynamic environments, it appears to harm innovation in a more-dynamic context. Interestingly, spatial boundary-spanning search seems to contribute to innovation in more- as well as less-dynamic environments. With the caveat that the substantive findings of this study are based on cross-sectional data, we discuss the implications of our work and future research directions.

Suggested Citation

  • Jatinder S. Sidhu & Harry R. Commandeur & Henk W. Volberda, 2007. "The Multifaceted Nature of Exploration and Exploitation: Value of Supply, Demand, and Spatial Search for Innovation," Organization Science, INFORMS, vol. 18(1), pages 20-38, February.
  • Handle: RePEc:inm:ororsc:v:18:y:2007:i:1:p:20-38
    DOI: 10.1287/orsc.1060.0212
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    References listed on IDEAS

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