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Exploration and exploitation and firm performance variability: a study of ambidexterity in entrepreneurial firms

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Abstract

A challenge young entrepreneurial firms usually face is reducing variability in firm performance in order to mitigate survival difficulties. This paper suggests ventures should have a clear preference for either exploration or exploitation, because such an approach to ambidexterity reduces variability in firm performance. We specifically concentrate on the moderation effects of firm size and environmental dynamism in a sample of young entrepreneurial firms. We found evidence for the effects of lower performance variability in dynamic environments. This is an important insight, because environmental dynamism is a contingency where performance variance is considered problematic for entrepreneurial firms. Our research has implications for the establishment phase of entrepreneurial firms as it suggests they should carefully consider how much they explore to be as different as possible and how much they exploit to be as effective as possible. This is particularly important when they are younger and exposed to dynamic environments.

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Notes

  1. Unless stated otherwise, for brevity, we refer to ambidexterity as balance in exploration and exploitation.

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Authors and Affiliations

  1. Entrepreneurship and Innovation, Luleå University of Technology, 971 87, Luleå, Sweden

    Vinit Parida & Joakim Wincent

  2. Department of Management, University of Vaasa, P.O Box 700, Vaasa, Finland

    Vinit Parida

  3. Entrepreneurship and Management, Hanken School of Economics, PB 479, 00100, Helsinki, Finland

    Tom Lahti & Joakim Wincent

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  1. Vinit Parida
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Parida, V., Lahti, T. & Wincent, J. Exploration and exploitation and firm performance variability: a study of ambidexterity in entrepreneurial firms. Int Entrep Manag J 12, 1147–1164 (2016). https://doi.org/10.1007/s11365-016-0387-6

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