The impact of customer characteristics on exploitation and exploration capabilities: An empirical study of outsourcing service companies

Abstract

There is a long history of examining exploitation and exploration capabilities as the key drivers of organizational learning, but the research that pursues the synergistic impact of various customer characteristics on these two capabilities of firms is yet to emerge. This article utilizes fuzzy set theory to develop a method that accounts for the combined effect of the three key characteristics of customers, namely customer involvement, customer sophistication, and customer geographical location on the exploration and exploitation capabilities of firms. Applying the proposed method to a sample of 86 Outsourcing Service Companies (OSCs) around the world, our findings highlight the disproportionate impact of customers' influence on the learning capabilities of four different types of OSCs: technology-based, engineering, knowledge-based, and business service firms. This empirical study makes a key contribution by way of developing a quantitative picture of the interplay between customer characteristics and the exploration and exploitation capabilities of OSCs, which in turn provides a measure of the extent to which interactions with customers enhance these two capabilities of firms.