Individual, team and organizational antecedents of explorative and exploitative innovation in manufacturing firms

Abstract

Innovation is crucial for the long-term survival and growth of organizations. Many manufacturing companies face intense pressures to innovate and develop new products that meet customer requirements. A central component of success in new product development is the maintenance of a balance between exploration and exploitation. Exploration can be defined as the pursuit of new knowledge of things that might come to be known, exploitation as the use and development of things already known. Organizations encounter various challenges in balancing and organizing these activities as they entail inherent contradictions that need to be managed. This research provides new insights into the antecedents of exploration and exploitation on the individual, team and organizational level. It demonstrates that organizations pursuing both incremental and radical innovation should structure explorative and exploitative processes differently. Incremental innovation requires a functional structure, whereas radical innovation benefits from a cross-functional structure. Besides structural factors, this research stresses the relevance of cognitive factors in explaining innovation performance. In new product development teams, analytical processing of information has a positive impact on the performance of both explorative and exploitative innovation projects. Intuitive processing, however, only has a positive impact on performance of explorative innovation projects, where creativity and experimenting are important. In exploitative projects, where focus lies on efficiency and standardization, intuitive processing has a negative impact on project performance. Exploration and exploitation thus demand different organizational structures, but also different thinking styles. This research also shows how thinking styles of CEOs and investing in exploration and exploitation are linked. Finally, relationships between cognitive and structural factors and how they affect the evolution of exploration and exploitation within a firm are explored in a longitudinal study.