Achieving a balance between exploration and exploitation in service firms: A longitudinal study

Abstract

Whereas 'ambidexterity' is frequently seen as the solution to be successful through balancing exploration and exploitation simultaneously, other scholars concluded that exploration and exploitation can also be achieved by a 'punctuated equilibrium'. The existing literature is relatively silent on the question whether ambidexterity and punctuated equilibrium are equally viable mechanisms, or what would be the conditions under which one model would be prevalent over the other. The purpose of this paper is to investigate whether for service firms, the question of ambidexterity is as important as it is for manufacturing firms, and whether there are differences in the way a balance between exploration and exploitation is achieved. Drawing on longitudinal data of the Belgian Community Innovation Survey and the bel-first database, we examine 532 firms. Results show that both ambidexterity and punctuated equilibrium have a positive effect on firm performance growth. Furthermore, there is a significant difference in innovation behavior between service firms and manufacturing firms, whereby manufacturing firms are more likely to use the ambidexterity model and service firms the punctuated equilibrium model. As the positive effect on financial performance did not explain the difference in the use of various methods to achieve ambidexterity, we performed multiple case study research to understand in'depth the drivers why service firms prefer the punctuated equilibrium over the simultaneous ambidexterity model. Environmental pressure, leadership and available resources can be considered as the main drivers why managers prefer ambidexterity or punctuated equilibrium.