The Formation and Effects of Exploitative Dynamic Capabilities and Explorative Dynamic Capabilities: An Empirical Study

Lina Liu,Bo Yu,Weiwei Wu

doi:10.3390/su11092581

Abstract

Although previous studies have explored the formation and effects of dynamic capabilities, much remains to be learned on this topic. There has been little research on the formation and effects of exploitative dynamic capabilities and explorative dynamic capabilities. This paper provides an explanation of how entrepreneurial leadership style and slack resources affect the formation of exploitive dynamic capabilities and explorative dynamic capabilities and evaluates the effects of exploitive dynamic capabilities and explorative dynamic capabilities on competitive advantage. Based on a sample of 382 Chinese firms, the empirical results show that a transactional leadership style and absorbed slack resources can encourage the formation of exploitative dynamic capabilities, and that a transformational leadership style and unabsorbed slack resources are conducive to the development of explorative dynamic capabilities. Furthermore, exploitative dynamic capabilities and explorative dynamic capabilities can reinforce and complement each other. Exploitative dynamic capabilities positively impact explorative dynamic capabilities, and explorative dynamic capabilities enhance exploitative dynamic capabilities. In particular, exploitative dynamic capabilities have an important effect on short-term financial performance, and explorative dynamic capabilities lead to a significant long-term competitive advantage. The results show that explorative dynamic capabilities surpass exploitative dynamic capabilities in terms of competitive advantage, even if both have a positive influence on competitive advantage. This study validates and develops the theory of dynamic capabilities.

Highlights

Over the past 20 years, scholars have studied the important role of dynamic capabilities in achieving innovation and competitive advantage through integrating, building, and reconstructing internal and external capabilities to adapt to rapidly changing environments [1]
We further examined heterogeneous entrepreneurial leadership style to reveal the impact of entrepreneurial leadership style on the formation of exploitative dynamic capabilities and explorative dynamic capabilities
We found that transactional leadership style has a significantly positive effect on exploitative dynamic capabilities (β= 0.22, t = 3.11, p < 0.01)

Summary

Introduction

Over the past 20 years, scholars have studied the important role of dynamic capabilities in achieving innovation and competitive advantage through integrating, building, and reconstructing internal and external capabilities to adapt to rapidly changing environments [1]. “Exploration includes things captured by terms such as search, variation, risk taking, experimentation, play, flexibility, discovery, innovation. Exploitation includes such things as refinement, choice, production, efficiency, selection, implementation, execution” Exploitation involves searching for known knowledge and efficiency, while exploration involves searching for new knowledge and flexibility [5,6]. Both exploitative dynamic capabilities and explorative dynamic capabilities are important for firm innovation [2,3,4]

Objectives

Results

Discussion

Conclusion