Organizational Ambidexterity of SMEs: History
View Latest Version
Please note this is an old version of this entry, which may differ significantly from the current revision.
Contributor:
Gayoung Kim
,
Woo Jin Lee
,
Hoshik Shim

According to the organizational learning theory, there are two types of corporate activities, exploitation and exploration, for enhancing and improving corporate performance. However, organizations are continually faced with choosing between these two conflicting activities that require different organizational structures, strategies, and environments, respectively. 

  • SMEs
  • organizational ambidexterity
  • organizational learning theory

1. Introduction

The company maximizes corporate operation efficiency by maximizing the exploitation of accumulated resources through management. However, in today’s market environment of high market uncertainty, businesses must explore new opportunities. Exploration activities at a company can capitalize on opportunities for new products, services, and innovative technologies. So, in today’s companies, exploitation should be performed simultaneously with exploration. Companies must establish a process that balances exploitation and exploration [1]. Large enterprises have relatively abundant resources. However, because resources are always scarce, it is difficult for small- and medium-sized enterprises (SMEs) and ventures (hereinafter referred to as small- and medium-sized enterprises (SMEs)) to balance exploitation and exploration [2]. Various studies suggest approaches for carrying out these two activities. Organizational ambidexterity refers to an organization’s ability to pursue and balance these two activities at the same time. Recently, SMEs and ventures have also adopted an ambidexterity strategy that simultaneously operates exploitation and exploration for performance and survival [3][4].

2. The Concept of Exploitation and Exploration

March (1991) [2] published a key paper on exploitation and exploration in organizational learning, which clearly stated the notion of the activities required by the firm. Exploitation implies an organization’s activities, such as efficiency, selection, execution, production, as well as firms learning to enhance their existing capabilities and competencies, using existing knowledge, focusing on current activities, mitigating risks, and predicting outcomes through exploitation in their existing business [3][5][6]. Organizational activities associated with exploration include variation, new knowledge, experimentation, flexibility, long-term needs, risk-taking, entrepreneurship, and innovation [7][8][9]. Exploration, in other words, refers to the development of new organizational routines, as well as the discovery of new technologies, products, business opportunities, and processes [8][10][11].
Based on the conceptual understanding of exploitation and exploration, previous studies have identified what each activity produces as an outcome within the organization. Juni et al. (2013) [3] found that exploratory activity was primarily related to the firm’s long-term growth in their meta-analysis. While the firm’s exploration activities may not impact immediate profit, they eventually positively impact growth [12]. In contrast, firms pursuing productivity efficiency rather than innovation were the focus of exploitation activity [3][13]. That is, the firm’s exploitative activities mainly relate to the firm’s current profits but do not closely relate to growth [3]. Organizations may abandon a promising and seemingly attractive business opportunity because stakeholders perceive the opportunity as overly disruptive. [14].
Because it is hard to choose just one of the two strategies, previous research on ambidexterity has argued that firms must balance exploitation and exploration [15]. The ability to aim and apply exploration and exploitation has been suggested as essential for the long-term performance and survival of organizations [3][4]. Furthermore, according to Schumpeterian theory, innovative organizations outperform noninnovative ones, and ambidextrous organizations outperform businesses that focus solely on one strategy, such as exploitation or exploration [16].
However, organizational ambidexterity is recognized as a paradoxical characteristic in the sense of pursuing two different activities at the same time as evidenced by the use of various terminologies in various studies. Scholars, for example, assert that causation and effectuation are not mutually exclusive but rather interactive relationships [17][18] and that these two strategies can be viewed as distinct types of exploitation and exploration [2][19][20], cost leadership and differentiation [21], competition and collaboration [22], and efficiency and flexibility [23][24].

3. Characteristics of SMEs

SMEs face greater difficulties than large corporations when pursuing an ambidexterity strategy. The majority of previous studies on ambidexterity have concentrated on large corporations. However, in recent years, there has been a growing body of literature studying the practice of ambidexterity at the scope of SMEs, such as ventures, high-tech startups, and entrepreneurial firms [25]. Many SMEs face managerial quandaries regarding their growth, such as whether to pursue differentiation or low cost as a strategy, adopt a mechanistic or flexible structure, or prioritize control or autonomy [26]. SMEs may require a new logic to effectively manage their resources and introduce entrepreneurial bricolage, which is defined as “making do by applying combinations of the resources at hand to new problems and opportunities” [27]. SMEs’ core competencies and management skills are to overcome scarce resources and operate ambidextrous organizations.

4. Features of Organizational Ambidexterity

Firms can use organizational ambidexterity to solve conflict and the dilemma of paradoxes by employing a few typologies. In previous studies, two ambidextrous methods, contextual and structural ambidexterity, were most representatively presented. Structural ambidexterity is defined as the separation of individuals or groups based on the action plan of an organization [28][29][30]. To address the conflict and dilemma created by the paradoxes of balancing exploration and exploitation, firms establish separate units that respond to environmental changes and communicate with external stakeholders.
On the other hand, contextual ambidexterity is defined as performing both two strategies at an individual level in the organizational unit [29]. Individuals focus on the organization’s regular activities while also undertaking new activities [29]. According to this HRM viewpoint, an ambidextrous structure enables an organization to better take advantage of business opportunities while holding onto its current market share. However, when implementing contextual ambidexterity, an important question about who can manage an individual arises [31][32].
Previous literature suggests another pathway to achieve organizational ambidexterity for firms; sequential ambidexterity [30][33]. Sequential ambidexterity refers to an organization’s focus on one of the competing objectives in turn.
Firms achieve different structural alternatives, such as structural or contextual separation, to resolve the organizational paradox. While earlier studies argued that firms should build separate organizational units to gain the benefits of adaptability and alignment at the same time [15][34][35]. However, the separated units may not be effective for SMEs due to their small size and limited resources. In reality, these structures hinder the sharing of knowledge and capabilities with the mainstream units. Thus, Duncan (1976) [36] suggests that organizations should implement a dual structure that allows them to structurally respond to their environment while pursuing both exploration and exploitation.

5. Performance in the SME Organizations

Empirical studies have already indicated that ambidextrous organizations have a positive effect on the firm’s performance [4][31][33][37][38][39][40][41]. Many studies have proposed that organizational ambidexterity is related to a longer period of survival [42], better financial performance [43][44][45], and improved learning and innovation [46][47], whether directly related to the firm’s performance or not.
However, scholars still have arguments that pursuing such organizational ambidexterity can be either beneficial or detrimental to firms [48][49][50]. The lack of empirical tests of the ambidexterity-performance relationship has been criticized by Raisch and Birkinshaw (2008) [30] and Andriopoulos and Lewis (2009) [51]. Few studies have provided empirical support for the hypothesis of ambidexterity and performance. For example, Bierly and Daly (2001) [52] investigated the impact of ambidexterity on firm performance in a sample of 98 manufacturing firms but found no significant results. Katila and Ahuja (2002) [53] discovered a positive relationship between the proclivity to cite different patents and the proclivity to cite specific patents repeatedly on new product development, but did not test the impact on firm performance [54].
These ambiguous findings encourage further investigation into whether ambidexterity has a significant impact on the performance and survival of SMEs. However, it is a challenge to capture when and how ambidexterity is implemented and results are created due to the nature of SMEs that operate firms with scarce resources.

This entry is adapted from the peer-reviewed paper 10.3390/su142416550

References

  1. Kuran, T. The tenacious past: Theories of personal and collective conservatism. J. Econ. Behav. Organ. 1988, 10, 143–171.
  2. March, J.G. Exploration and exploitation in organizational learning. Organ. Sci. 1991, 2, 71–87.
  3. Junni, P.; Sarala, R.M.; Taras, V.; Tarba, S.Y. Organizational ambidexterity and performance: A meta-analysis. Acad. Manag. Perspect. 2013, 27, 299–312.
  4. Jansen, J.J.P.; Simsek, Z.; Cao, Q. Ambidexterity and performance in multiunit contexts: Cross-level moderating effects of structural and resource attributes. Strateg. Manag. J. 2012, 33, 1286–1303.
  5. Holmqvist, M. A dynamic model of intra-and interorganizational learning. Organ. Stud. 2003, 24, 95–123.
  6. Levinthal, D.A.; March, J.G. The myopia of learning. Strateg. Manag. J. 1993, 14, 95–112.
  7. Cameron, K.S.; Quinn, R.E. Diagnosing and Changing Organizational Culture: Based on the Competing Values Framework; John Wiley & Sons: New York, NY, USA, 2011.
  8. Schulz, M. The uncertain relevance of newness: Organizational learning and knowledge flows. Acad. Manag. J. 2001, 44, 661–681.
  9. Vermeulen, F.; Barkema, H. Learning through acquisitions. Acad. Manag. J. 2001, 44, 457–476.
  10. McGrath, R.G. Exploratory learning, innovative capacity, and managerial oversight. Acad. Manag. J. 2001, 44, 118–131.
  11. Eisenhardt, K.M.; Schoonhoven, C.B. Organizational growth: Linking founding team, strategy, environment, and growth among US semiconductor ventures, 1978–1988. Adm. Sci. Q. 1990, 35, 504–529.
  12. Sussan, F.; Acs, Z.J. The digital entrepreneurial ecosystem. Small Bus. Econ. 2017, 49, 55–73.
  13. Sato, H. Routine-based view of organizational learning and mechanisms of myopia. Ann. Bus. Adm. Sci. 2012, 11, 45–54.
  14. Christensen, C.M.; Bower, J.L. Customer power, strategic investment, and the failure of leading firms. Strateg. Manag. J. 1996, 17, 197–218.
  15. Tushman, M.L.; O’Reilly, C.A., III. Ambidextrous organizations: Managing evolutionary and revolutionary change. Calif. Manag. Rev. 1996, 38, 8–29.
  16. Soares, J.L.; dos Reis, D.R.; da Cunha, J.C.; Neto, P.J.S. Organizational ambidexterity: A study in Brazilian higher education institutions. J. Technol. Manag. Innov. 2018, 13, 36–46.
  17. Brettel, M.; Mauer, R.; Engelen, A.; Küpper, D. Corporate effectuation: Entrepreneurial action and its impact on R&D project performance. J. Bus. Ventur. 2012, 27, 167–184.
  18. Reymen, I.M.M.J.; Andries, P.; Berends, H.; Mauer, R.; Stephan, U.; Van Burg, E. Understanding dynamics of strategic decision making in venture creation: A process study of effectuation and causation. Strateg. Entrep. J. 2015, 9, 351–379.
  19. Cao, Q.; Gedajlovic, E.; Zhang, H. Unpacking organizational ambidexterity: Dimensions, contingencies, and synergistic effects. Organ. Sci. 2009, 20, 781–796.
  20. Yu, C.; Zhang, M.; Ren, F. Collective learning for the emergence of social norms in networked multiagent systems. IEEE Trans. Cybern. 2014, 44, 2342–2355.
  21. Porter, M. Competitive Strategy; Free Press: New York, NY, USA, 1980.
  22. Li, M.; Nguyen, B.; Yu, X. Competition vs. collaboration in the generation and adoption of a sequence of new technologies: A game theory approach. Technol. Anal. Strateg. Manag. 2016, 28, 348–379.
  23. Adler, P.S.; Goldoftas, B.; Levine, D.I. Flexibility versus efficiency? A case study of model changeovers in the Toyota production system. Organ. Sci. 1999, 10, 43–68.
  24. Ebben, J.J.; Johnson, A.C. Efficiency, flexibility, or both? Evidence linking strategy to performance in small firms. Strateg. Manag. J. 2005, 26, 1249–1259.
  25. Simon, H. Hidden Champions of the Twenty-First Century: The Success Strategies of Unknown World Market Leaders; Springer Science & Business Media: Berlin, Germany, 2009.
  26. Ikhsan, K.; Almahendra, R.; Budiarto, T. Contextual ambidexterity in SMEs in Indonesia: A study on how it mediates organizational culture and firm performance and how market dynamism influences its role on firm performance. Int. J. Bus. Soc. 2017, 18, 369–390.
  27. Baker, T.; Nelson, R.E. Creating something from nothing: Resource construction through entrepreneurial bricolage. Adm. Sci. Q. 2005, 50, 329–366.
  28. Benner, M.J.; Tushman, M.L. Exploitation, exploration, and process management: The productivity dilemma revisited. Acad. Manag. Rev. 2003, 28, 238–256.
  29. Gibson, C.B.; Birkinshaw, J. The antecedents, consequences, and mediating role of organizational ambidexterity. Acad. Manag. J. 2004, 47, 209–226.
  30. Raisch, S.; Birkinshaw, J. Organizational ambidexterity: Antecedents, outcomes, and moderators. J. Manag. 2008, 34, 375–409.
  31. Lubatkin, M.H.; Simsek, Z.; Ling, Y.; Veiga, J.F. Ambidexterity and performance in small-to medium-sized firms: The pivotal role of top management team behavioral integration. J. Manag. 2006, 32, 646–672.
  32. Mom, T.J.M.; Van Den Bosch, F.A.J.; Volberda, H.W. Investigating managers’ exploration and exploitation activities: The influence of top-down, bottom-up, and horizontal knowledge inflows. J. Manag. Stud. 2007, 44, 910–931.
  33. Simsek, Z.; Heavey, C.; Veiga, J.F.; Souder, D. A typology for aligning organizational ambidexterity’s conceptualizations, antecedents, and outcomes. J. Manag. Stud. 2009, 46, 864–894.
  34. Puranam, P.; Singh, H.; Zollo, M. Organizing for innovation: Managing the coordination-autonomy dilemma in technology acquisitions. Acad. Manag. J. 2006, 49, 263–280.
  35. Rosenbloom, R.S.; Christensen, C.M. Technological discontinuties, organizational capabilities, and strategic commitments. Ind. Corp. Change 1994, 3, 655–685.
  36. Duncan, R.B. The ambidextrous organization: Designing dual structures for innovation. Manag. Organ. 1976, 1, 167–188.
  37. Boumgarden, P.; Nickerson, J.; Zenger, T.R. Sailing into the wind: Exploring the relationships among ambidexterity, vacillation, and organizational performance. Strateg. Manag. J. 2012, 33, 587–610.
  38. He, Z.L.; Wong, P.K. Exploration vs. exploitation: An empirical test of the ambidexterity hypothesis. Organ. Sci. 2004, 15, 481–494.
  39. Li, Y.H.; Huang, J.W. Ambidexterity’s mediating impact on product development proficiency and new product performance. Ind. Mark. Manag. 2012, 41, 1125–1132.
  40. Im, G.; Rai, A. Knowledge sharing ambidexterity in long-term interorganizational relationships. Manag. Sci. 2008, 54, 1281–1296.
  41. Kostopoulos, K.C.; Bozionelos, N. Team exploratory and exploitative learning: Psychological safety, task conflict, and team performance. Group Organ. Manag. 2011, 36, 385–415.
  42. Cottrell, T.; Nault, B.R. Product variety and firm survival in the microcomputer software industry. Strateg. Manag. J. 2004, 25, 1005–1025.
  43. Derbyshire, J. The impact of ambidexterity on enterprise performance: Evidence from 15 countries and 14 sectors. Technovation 2014, 34, 574–581.
  44. Govindarajan, V.; Trimble, C. Building breakthrough businesses within established organizations. Harv. Bus. Rev. 2005, 83, 58–68.
  45. Kitapçi, H.; Çelik, V. Ambidexterity and firm productivity performance: The mediating effect of organizational learning capacity. Procedia Soc. Behav. Sci. 2013, 99, 1105–1113.
  46. Eriksson, P.E. Exploration and exploitation in project-based organizations: Development and diffusion of knowledge at different organizational levels in construction companies. Int. J. Proj. Manag. 2013, 31, 333–341.
  47. Holmqvist, M. Experiential learning processes of exploitation and exploration within and between organizations: An empirical study of product development. Organ. Sci. 2004, 15, 70–81.
  48. Agogué, M.; Levillain, K.; Hooge, S. Gamification of creativity: Exploring the usefulness of serious games for ideation. Creat. Innov. Manag. 2015, 24, 415–429.
  49. Fisher, G. Effectuation, causation, and bricolage: A behavioral comparison of emerging theories in entrepreneurship research. Entrep. Theory Pract. 2012, 36, 1019–1051.
  50. Smolka, K.M.; Verheul, I.; Burmeister-Lamp, K.; Heugens, P.P.M.A.R. Get it Together! Synergistic Effects of Causal and Effectual Decision–Making Logics on Venture Performance Get It Together. Entrep. Theory Pract. 2018, 42, 571–604.
  51. Andriopoulos, C.; Lewis, M.W. Exploitation-exploration tensions and organizational ambidexterity: Managing paradoxes of innovation. Organ. Sci. 2009, 20, 696–717.
  52. Bierly, P.; Daly, P.S. Exploration and exploitation in small manufacturing firms. In Proceedings of the 61st Annual Meeting of the Academy of Management, Washington, DC, USA, 3–8 August 2001.
  53. Katila, R.; Ahuja, G. Something old, something new: A longitudinal study of search behavior and new product introduction. Acad. Manag. J. 2002, 45, 1183–1194.
  54. Han, M.; Celly, N. Strategic ambidexterity and performance in international new ventures. Can. J. Adm. Sci./Revue Canadienne des Sciences de l’Administration 2008, 25, 335–349.
More
© Text is available under the terms and conditions of the Creative Commons Attribution (CC BY) license; additional terms may apply. By using this site, you agree to the Terms and Conditions and Privacy Policy.
This entry is offline, you can click here to edit this entry!
ScholarVision Creations
Feedback