The Role of Exploration, Exploitation and Dynamic Capabilities: South Korean Entertainment Firms’ Proactive Response Strategies to the COVID-19 Pandemic

Research purpose. This study aims to develop a model of firms’ survival strategy during the COVID-19 pandemic by integrating the concepts of exploration, exploitation, and dynamic capabilities to develop a model of firms’ survival strategy during the COVID-19. We argue that the COVID-19 pandemic forced firms to undergo three processes of sensing, seizing, and reconfiguring suggested by Teece (2007), and to choose exploration or exploitation in each process in a timely manner. The interplay of the three processes for dynamic capabilities and two strategic orientations gives rise to a typology of six proactive response strategies. Design / Methodology / Approach. The research design takes the form of a case study focusing on the two Korean successful entertainment firms, JYP Entertainment and HYBE. JYP is one of the early-established firms that started the Korean Wave in 1997, and HYBE is a dominant late-mover founded in 2005. Using a Typology of six proactive response strategies, the two firms’ actions in the COVID-19 are reviewed. Findings. The strategic trajectory of HYBE shows internal sourcing, platform creating and radical change, while that of JYP shows internal sourcing, platform strengthening, and incremental change. Together, these cases demonstrate five of the six strategies from our typology, with neither company engaging in External Sourcing during the pandemic. HYBE’s trajectory was more explorative in the later stages (developing a new platform and making a radical change), whereas JYP’s was more exploitative (strengthening an existing platform and making incremental changes), highlighting two different yet successful approaches to crisis management. Originality / Value / Practical implications. This study makes a contribution by integrating the concepts of exploration and exploitation with dynamic capabilities through the lens of Teece’s framework (sensing, seizing, and reconfiguring) to address strategic decision-making during COVID-19. By examining South Korean entertainment firms, this research fills a gap in understanding how firms can balance the tension between exploration and exploitation, especially when responding to the unpredictable challenges posed by the COVID-19 pandemic. In particular, we identify six proactive response strategies, External Sourcing, Internal Sourcing, Platform Creating, Platform Strengthening, Radical Change, and Incremental Change, that illustrate specific ways in which firms can achieve this balance in practice. The findings of this study provide a practical implication for managers to assess and implement strategic responses in uncertain environments. This implication helps managers determine the right balance between explorative innovation and exploitative efficiency, ensuring that strategic responses should be aligned with organizational goals and timely.