Capitalizing the balance of exploration and exploitation: evidence from Australian, German, and Indian biotechnology firms

Research has widely acknowledged the beneficial impact of ambidexterity—the balance between exploration and exploitation — on a firm’s performance outcomes such as innovativeness and financial performance. Small and medium-sized enterprises (SMEs), however, are especially challenged to simultaneously pursue both exploration and exploitation because they cannot rely on the same slack resources and administrative systems that larger firms can. While prior research indicates that SMEs might develop firm capabilities to overcome resource constraints and profit from ambidexterity, the results are either inconclusive or there are too few studies to confirm these assumptions. This dissertation explains how SMEs can use capabilities such as contextual ambidexterity and absorptive capacity in order to capitalize on the outcomes resulting from the balance of inter- and intrafirm exploration and exploitation. Specific findings from this conceptual and empirical work are that (1) A tailored approach to absorptive capacity amplifies the effect of ambidexterity in small firms; (2) national context and its effect on leadership affects the level of ambidexterity; and (3) incorporating social-integration measures boosts potential and realized absorptive capacity and their complementary effects on firm performance. Study 1, titled A capability-based framework to capture the performance outcomes of alliance ambidexterity : the moderating roles of contextual ambidexterity and absorptive capacity, indicates that both contextual ambidexterity and absorptive capacity enable smaller firms to overcome the negative impacts of alliance ambidexterity resulting from operational redundancy and coordination conflicts by using their limited financial and managerial resources more efficiently to balance their alliances. This integrative approach to multiple levels of ambidexterity and absorptive capacity provides a move towards understanding the complex interplay of a firm’s contextual ambidexterity and absorptive capacity when leveraging explorative and exploitative alliances. Thus, it helps to identify bottlenecks in the ambidexterity and absorptive capacity research and offers new and useful links for future empirical studies to overcome these limitations. The findings of Study 2, titled How absorptive capacity impacts the value of balanced alliance networks : evidence from new biotechnology firms in Germany, demonstrate that alliance ambidexterity is negatively related to firm performance, but that absorptive capacity can help firms overcome these detrimental effects by resolving internal contradictions ,intensifying the speed of knowledge sharing, and reducing operational redundancy. This study thus extends our understanding of how new ventures can benefit from balanced alliance networks and underscores the importance of partner-related capabilities to profit from alliance ambidexterity. Study 3, titled Antecedents and performance outcomes of absorptive capacity : an empirical investigation into the German biotechnology industry, shows that potential and realized absorptive capacity are differently influenced by distinct social integration mechanisms, and both dimensions of absorptive capacity have complementary effects on a firm’s innovativeness and financial performance. Thus, this study shows that intraorganizational antecedents of absorptive capacity lead to varying levels of potential and realized absorptive capacity and thus enhances our understanding of why some firms benefit more from external knowledge than do others. The final study, Organizational ambidexterity in light of national culture : a comparative study of Australian, German, and Indian biotechnology SMEs, shows how the combination of goal-setting, risk-taking, and supportive leadership shapes an organizational context in a way that promotes ambidextrous behaviour within these firms. This study also provides evidence about how national culture influences ambidexterity by showing that power distance positively affects ambidexterity and uncertainty avoidance negatively affects ambidexterity. Moreover, findings demonstrate that uncertainty avoidance in particular negatively moderates the relationship between an organizational context and ambidexterity. Thus, this study explores how socio-environmental factors influence firm-level activities such as leadership processes and employees’ behaviour and offers an explanation for cross-national differences in balancing exploration and exploitation. In sum, this dissertation addresses (1) the role of firm capabilities in leveraging alliance ambidexterity; (2) the complementarity of absorptive capacity; (3) leadership’s role in contextual approaches of ambidexterity; and (4) national culture’s impact on ambidexterity several important research issues about ambidexterity and absorptive capacity, two major concepts in organizational learning literature. Hence, these four studies theoretically refine the concepts of organizational ambidexterity and absorptive capacity, as well as to develop recommendations for managers about how to balance exploration and exploitation by using their firm’s capabilities in a more targeted and directed way