Balancing exploration and exploitation in complex environments

Abstract

PurposeThe objective of this study is to model and analyze the exploration‐exploitation dynamics of March's model of mutual learning in a complex environment. By enhancing the above mentioned model, the paper seeks to propose a new agent‐based model of mutual learning within an organization.Design/methodology/approachThe paper replicates March's model of simulating learning within an organization using an agent‐based simulation approach, and extends it by modelling the problem space as a fitness landscape using Kauffman's NK model technique.FindingsIt was found that it is impossible to find a right balance between exploration and exploitation using the communication structure of March's model.Practical implicationsThe proposed model could help create a virtual laboratory for experimenting organizations' behavior in a complex co‐evolving environment. This virtual laboratory may be used in the future to support the decision‐making process of managers and policy makers.Originality/valueDesigning the external environment as a fitness landscape helps in discovering what effect the environmental complexity has on the emerging balance between exploration and exploitation. It is the first study to design the environment of a model which analyzes the mutual learning between an organization and its members as a complex non‐linear space.