Performance implication of exploration and exploitation in foreign markets: the role of marketing capability and operation flexibility

Abstract

PurposeThe purpose of this paper is to examine the performance impact of foreign ventures' exploration and exploitation strategies in emerging markets. Exploration and exploitation represent key strategic choices and have been extensively studied in the context of domestic markets. Yet the implication of such innovation strategies for foreign ventures operating in emerging markets has been under-researched. We aim to investigate whether foreign ventures can realize the value of exploration and exploitation strategies in emerging markets and also the moderating role of marketing capability and operation flexibility to enable the implementation process.Design/methodology/approachThis study adopts the hierarchical moderated regression approach using a sample of foreign ventures operating in high-tech manufacturing industries in China.FindingsThe authors find that both exploration and exploitation have positive effects on firms' financial performance. Marketing capability strengthens the performance impact of exploration, but exhibits no such impact of exploitation. Moreover, operation flexibility positively moderates the effects of both exploration and exploitation on performance.Research limitations/implicationsThis study provides important insights into whether foreign ventures can boost performance through exploration and exploitation strategies in emerging markets as well as the implementation-level factors that can facilitate such positive effects.Originality/valueThe study is novel in revealing the moderating role of marketing capability and operation flexibility in facilitating the performance outcome of exploration and exploitation strategies.