Interlevel Learning Dynamics: Balancing Exploitation and Exploration Within and Between Organizations

The literature on organizational learning has traditionally either conceptualized learning as an intraorganizational or as an interorganizational process without taking into consideration how these different levels of learning are interlaced. We propose an integrated conceptual framework of intra- and interorganizational learning processes that address the fundamental experiential learning problem of balancing exploitation and exploration – a central issue for organizational development and prosperity. The conceptual framework is empirically studied in two longitudinal case studies of the internal and external product development activities of Scandinavian and American software companies. The case findings indicate that learning at both the intra- and interorganizational levels tend towards exploitation, i.e., refinement, routinisation, and production; while switching between levels in both directions was associated with exploration, i.e., experimentation, innovation, and free association. By studying both levels of learning simultaneously, it was hence possible to discern the pattern of exploratory switching between levels from the traditional view of interorganizational learning itself being mainly exploratory and intraorganizational learning being mainly exploitative. It was also possible to systematically track how intra- and interorganizational processes follow specific, interlaced sequences of experiential learning within and between organizations.