Unpacking the effect of exploration during environmental uncertainty: Evidence from the information technology sector

Abstract

Environmental uncertainty can render managerial decision-making about resource deployment particularly difficult. Integrating the knowledge-based view of the firm and the organizational learning literature, we make a case for deploying specific knowledge-based resources to cope with specific types of environmental uncertainty. We unbundle knowledge-based resources into technology-based and social-network-based resources and, using Milliken's (1987) typology of environmental uncertainty, we hypothesize that (a) technological exploration will be more effective during state uncertainty and (b) while being generally beneficial, social exploration will prove more effective during response uncertainty. An analysis of the financial performance of information technology (IT) firms in the United States over the period 1995-2004 generally supports our hypotheses.