Specialisation in technology exploration and exploitation: a systems approach

Abstract

Technologically-oriented firms must allocate resources between exploration (research) and exploitation (development) activities. While scholars have emphasised the need for a mix between exploration and exploitation, some firms consciously choose to specialise only in either exploration or exploitation. The reasons for such a strategic posture could be many, including rigidities emanating from resources or routines. While previous studies suggest that an exploration/exploitation mix is necessary for success in an innovation strategy, focused strategies have recently come into research focus. We adopt a methodological approach using case studies combined with an agent-based simulation model in order to learn about the effectiveness of specialisation strategies. The results suggest that an exploration-based specialisation strategy can have a relative advantage over an exploitation-based specialisation strategy, and a balanced strategy is not absolutely necessary to ensure innovation success. We find that as competitive intensity increases, the relative advantage of exploration-based specialisation strategy diminishes.