Exploratory and Exploitative Organizations and Firm Performance

Exploratory and Exploitative Organizations and Firm Performance
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Exploratory and Exploitative Organizations and Firm Performance
Abstract
Business organizations tend to use their existing competencies and resources to maintain their competitiveness in the diverse economic sectors for sustainable growth and development. Among the competencies for exploitation or exploration by a firm may include its management of knowledge, information cooperation, search breadth, and ability to employ collaboration. The exploitation and or exploration of the outlined competencies have equally diverse effects on the performance of a firm. Provided herein is a comprehensive analysis of both the exploitation and exploration of the outlined competencies and their unique influences on firm performance. The article makes use of literature review analysis of various studies on ambidexterity of organizations to showcase the effect of using the two aspects of the approach on firm performance. The study finds that effective exploitation of knowledge management and exploring the employment of collaboration in various business activities correlates to overall improvement in firm performance.
Introduction
The increasing competition within different sectors at both the local and global levels of the economy calls for increased investment in effective business strategies for sustainable growth and development (O’Reilly, C. A., 2011). Business entities strive to maintain their competitiveness in the highly competitive markets across the diverse sectors of the global economy. Sustainable growth and development offer the best remedy for continuous relevance in the market through consistent profits and revenue generation. However, maintaining such a positive growth trajectory calls for a comprehensive assessment of an organization’s competencies and their ability to sustain the firm’s viability in the market. The analysis of the firm’s competencies further highlights a firm’s potential for future growth and its adaptability to the emerging trends. The identified competencies or resources at a firm’s disposal determine whether the firm can sustain or rather maintain its daily business operations upon continuous exploitation (Kim, C.Y., 2019). The availability of resources also plays a significant role in expansion of business activities as they determine the firm’s potential for venturing or exploring other opportunities. Exploitation thus refers to one of the most common business strategies characterized by a firm’s ability to capitalize on its existing competencies or resources for maximum profitability and sustenance of the daily business operations. Exploration, on the other hand, refers to the firm’s ability to utilize its primary resources or competencies towards enhancing its flexibility or adaptability to future changes and emerging trends in the industry of operations.
Literature Review
It is common to find business organizations in joint or collaborative efforts in undertaking various projects that are beneficial to all the participants. Such collaborations tend to have different effects on firm performance, depending on the approach taken by an individual firm in utilizing such opportunities. According to Zhang (2019), employing collaboration in research and analysis of various business aspects between firms and research institutions promote innovation and the development of new ideas. Exploring such channels of innovation and development of new ideas is integral to sustainable growth and development of a firm as it leads to improved performance in the market (Yu, G. J., 2015). The innovations and ideas created function as a basis for enhancing the daily operations and expanding the business to incorporate the new ideas. Firms that have reached the maturity level of their life cycles can also exploit such platforms or employ collaboration in research and innovation to create a competitive edge in the market through advanced productivity or periodic introduction of new products.
Information cooperation also forms one of the primary competencies whose exploitation and or exploitation may lead to equally unique effects on firm performance. According to a research study by Shelley Xin Li and Tatiana Sandino (2017), information cooperation or sharing functions to enhance the available competencies within a firm as it encourages creativity in the workforce. The use of an information-sharing system serves to provide various benefits to the firm, including coordination of the daily business operations for a synchronized approach towards the achievement of the set objectives of a firm (Baihaqi, I., 2013). Exploiting such a system of information cooperation thus allows for the smooth running of daily operations as it harmonizes the activities of all the departments involved in the production process (Laursen, K., 2006). Exploring the same channels of sharing information creates an effective platform for the improvement of the production process through the enhanced creativity resulting from information cooperation. Effective application of the exploitative approach towards information cooperation leads to improved firm performance as it allows for synchronized enhancement of the firm’s activities across the different departments. Exploratory approach, on the same further creates a bank of creative ideas through which the firm stretches its available competencies for increased profitability without affecting the smooth running of daily operations.
The search breadth for knowledge and information also plays an integral role in determining the firm performance based on whether the firm uses either the exploitative or exploratory approach in utilizing the said resource. Extending the search breadth for the acquisition of external knowledge serves to provide substantial benefit for the firm through both exploitative and exploratory use of the resource. The extended search breadth strikes a balance between the exploitative and exploratory tendencies employed by the firm and thus providing the appropriate condition for using both strategies for optimal firm performance.
Knowledge management is perhaps one of the primary competencies of a firm that demands effective exploitation and exploration alike for improved performance of a firm. According to Diah Hari Suryaningrum (2012), effective systems of knowledge management reflect positively on a firm’s profitability and thus a positive indication of the firm’s performance. Knowledge management also plays a significant role in promoting innovation within a firm and thus contributing to the overall improvement of the firm’s performance (Wang, Z., 2012, Daud, S. 2018, & Marques, D. P., 2005). Effective knowledge manag...