"Exploration, Exploitation, and Variability: Competition for Primacy Revisited"

Abstract

Using formal simulation modeling, I examine how exploration and exploitation contribute to variability in organizational performance. I further examine how this variability influences competition for primacy, a context in which variability is a key success factor. The results of the analyses conducted using both the NK model of organizational adaptation and the multiarmed bandit model of exploration and exploitation show that, while exploration introduces more internal variability in organizations, exploitation tends to increase the variability in performance between different organizations. Variability and uniqueness in relation to one’s competitors, brought about by a single-minded focus on exploitation, are found to be advantageous in a race to finish first. Contrary to the established wisdom, in a competition for primacy, exploration tends to be harmful and the optimal strategy is one with an exploitative focus.