The effect of multi-dimensional exploratory search on firm performancee

This thesis investigates an overarching research question about how firms’ performance is affected by exploratory search, internal and external environmental conditions, and firms’ strategic change processes. Specifically, building on multiple theoretical lenses such as organizational learning theory, the knowledge based view of the firm, the theory of strategic renewal and higher order competences, the thesis extends the literature examining the relation between exploratory search and performance in a number of ways. First, drawing on organizational learning theory, the thesis conceptualizes and develops a measure of exploratory search in the regulatory environment (i.e., regulatory search). Second, building on the knowledge based view of the firm, the thesis examines the effects of regulatory and market search on firm performance in a contingency framework, with a focus on the moderating effect of internal environmental conditions, specifically slack, and external environmental conditions, specifically market environmental turbulence. Third, the thesis conceptualizes exploratory search as a complex and multi-dimensional construct (including both market and regulatory search), and frames the exploratory search and performance relation in the theoretical framework of strategic renewal. Using this framework, the thesis examines the mediating roles of research and development and marketing competences in the association between a firm’s overall exploratory search orientation (representing managerial intentions to renew) and firm performance (representing renewal outcomes). The format of the thesis is ‘thesis by publication’, consisting of three individual yet related papers. Paper 1 investigates the relation between regulatory search and firm innovativeness, and the moderating effect of slack on this relation. Regulatory search is conceptualized as a nonlocal and exploratory knowledge acquisition capability in a firm’s regulatory environment. Given there is no established scale for regulatory search, using survey data from the CEOs of Australian listed and private firms, a self-developed scale is used. Psychometric properties of the scale are examined with the results suggesting two independent factors, aligning with the knowledge requirements for the nonmarket strategies of anticipation (i.e., reactive regulatory search) and participation (i.e., proactive regulatory search). In relation to the direct effects of regulatory search factors on firm innovativeness, the results of the regression analysis indicate that only reactive search exhibits a positive and direct association with firm innovativeness. However, in relation to the moderating effects of firm slack, the results suggest that slack moderates the relation between the two regulatory search factors and innovativeness in different ways. Specifically, under a high (low) slack environment, reactive regulatory search negatively (positively) affects innovativeness, while under a high (low) slack environment, proactive regulatory search positively (negatively) affects innovativeness. Paper 2 investigates the moderating effect of market environmental turbulence (MET) on the relation between exploratory search (in both the market and regulatory environments) and firm competitiveness. MET is used to indicate both potential changes in the regulatory environment through customers’ potential collective actions, and a changing market environment through changing customer preferences and purchasing behaviours. Using both market search constructs (i.e., supply, demand, and geographical/spatial side search) from the existing literature and the self-developed regulatory search constructs (i.e., reactive and proactive regulatory search), the findings indicate that it is more effective for a firm to pursue demand side search and proactive regulatory search when MET is high, aligning with the strategies of ‘demand pull’ and ‘influence’ respectively. In contrast, supply side search and reactive regulatory search are more effective when MET is low, aligning with the strategies of ‘technology push’ and ‘anticipation’ respectively. The results suggest that, in addition to the contribution of a firm’s market search, regulatory search contributes to firm performance. Paper 3 investigates the intervening effects of research and development (R&D) and marketing competences (as firm-level strategic change processes) on the relation between exploratory search and firm performance. This investigation is placed in the theoretical framework of strategic renewal, suggesting that top management’s intentional search actions play an important part in a firm’s successful strategic renewal. Paper 3 conceptualizes managerial intentionality to renew as learning complexity, combining exploratory search in both the market and regulatory environments, and examines (1) how learning complexity affects R&D and marketing competences, and (2) how these competences affect the renewal outcomes (specifically, innovativeness and competitiveness). Using structural equation modelling, the empirical findings suggest that the learning complexity and innovativeness relation is mediated by R&D competence, representing the renewal channel of technological transformation, and the learning complexity and competitiveness relation is mediated by marketing competence, representing the renewal channel of marketing transformation. In summary, the research conducted in this thesis, through its three individual papers, contributes to both literature and practice by focusing on the influence of both the environment and managerial actions on firm performance. Overall, the findings of the research suggest that firm performance is influenced by managerial actions (i.e., the actions of exploratory search), both internal (firm slack) and external (market environmental turbulence) environmental conditions, and firm strategic change processes (i.e., R&D and marketing competences).