Exploration Versus Exploitation in Emerging Economies: The Role of State Ownership

Abstract

State ownership plays an important role in affecting firms’ innovation behavior in emerging economies. We theorize that state ownership may promote exploitative innovation but hinder exploratory innovation due to the principal-agent conflict. Furthermore, we propose that managers’ political ties with local government may help the firm to address this conflict and obtain preferential treatment for exploration. We examine our hypothese about state ownership, managers' political ties and ambidextrous innovation using empirical evidence from 122 emerging economies. Our research demonstrates that state ownership can make the firm engage in different types of innovation and we discuss the implications of our findings on state ownership and ambidextrous innovation.