Shifting back and forth: How does the temporal cycling between exploratory and exploitative R&D influence firm performance?

Abstract

Research on ambidexterity has established that many firms engage in temporal cycling between exploratory and exploitative activities, but it has not examined how quickly firms engage in temporal cycling and how this decision affects their performance. We enhance understanding of this phenomenon by examining how the speed at which innovative firms choose to cycle between exploratory and exploitative R&D influences their performance. We also examine contingencies that affect this relationship. Our longitudinal multi-level analysis of 32,527 observations shows that high-speed temporal cycling decreases firm performance by increasing time compression diseconomies in learning. However, we also show that this relationship is firm- and context-specific. Although high-speed cycling harms firms with large-scale R&D operations, it benefits firms that operate in technologically dynamic industries. Our study shifts the discussion from how much firms invest in exploration and exploitation to how quickly they change their focus from one activity to the other.