Academic journal article Management Revue

Unpacking Performance Benefits of Innovation Ambidexterity: Evidence from the Pharmaceutical Industry **

Academic journal article Management Revue

Unpacking Performance Benefits of Innovation Ambidexterity: Evidence from the Pharmaceutical Industry **

Article excerpt

1. Introduction

Innovation, or new technology-based products development in particular, is one of the most influential explanatory variables for favorable organizational performance in our age. However, this does not mean that we can explain organizational performance by solely considering innovation enabled by findings of revolutionarily new technological knowledge (henceforth, we refer to such innovation as exploratory innovation). Conversely, innovation enabled by new applications of existing technological knowledge (henceforth, exploitative innovation) also influences organizational performance substantially. For example, customers expect firms to innovate incrementally by exploiting existing technological knowledge, rather than by exploring novel technological knowledge (Christensen & Bower, 1996). Firms may also choose to forego opportunities to explore new product technology because their suppliers and distributors support exploitation of existing product technology (Glasmeier, 1991). Accordingly, the importance of simultaneously pursuing exploratory as well as exploitative innovation is underscored by recent research on organizational ambidexterity (O'Reilly & Tushman, 2008, among others).

Prior work on organizational ambidexterity uncovers performance benefits enabled by organizational ambidexterity with respect to various organizational aspects, including product configuration (Salvador, Chandrasekaran, & Sohail, 2014), modes of operation (Stettner & Lavie, 2014), innovation strategy (Cao, Gedajlovic, & Zhang, 2009; Derbyshire, 2014; He & Wong, 2004; Lubatkin, Simsek, Ling, & Veiga, 2006), search behaviors (Wang & Li, 2008), firm or business-unit contexts (Chang, Yang, & Chen, 2009; De Clercq, Thongpapanl, & Dimov, 2013; Gibson & Birkinshaw, 2004; Patel, Messersmith, & Lepak, 2013), organizational design (Adler, Goldoftas, & Levine, 1999; Chang et al., 2009), as well as founding team's prior affiliations (Beckman, 2006).

However, the prior research neglects to explicitly distinguish two distinct mechanisms in which organizational ambidexterity enables favorable organizational performance as it does not separately examine differences between two alternative complementary relationships between exploitation and exploration (Gupta, Smith, & Shalley, 2006; Katila & Ahuja, 2002). We refer to the two complementary relationships as a mutually compensatory relationship and a mutually enabling relationship, respectively. The former refers to a relationship in which exploitation and exploration mutually compensate for each other's deficiencies, in that they contribute to organizational performance in distinct, but mutually complementary ways. Put differently, exploitation's effects on organizational performance complement exploration's effects, and vice versa. On the other hand, in a mutually enabling relationship, exploitation and exploration mutually seeds and primes each other. More precisely, acts of exploitation complement acts of exploration by enabling the latter, and vice versa.

It is of theoretical as well as practical importance to take into account the differences between these alternative complementary relationships because they offer distinct explanations on the way in which ambidexterity enables favorable organizational performance. In addition to the locus of complementarity (i.e., effects or acts) and the mechanisms of performance benefits (i.e., compensatory or enabling), the two alternative complementary relationships also differ in their influences on the negative externalities between exploitation and exploration (Boumgarden, Nickerson, & Zenger, 2012). Furthermore, their differences inform us two distinct research directions for pursuing ambidexterity antecedents.

In this manuscript, we aim to fill this research gap by unpacking two alternative complementary relationships between exploitation and exploration, thereby arguing that organizational ambidexterity with respect to product innovation is positively associated with organizational performance in two distinct mechanisms. …

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