Exploration vs. Exploitation: How Innovation Strategies Impact Firm Performance and Competitive Advantage

Abstract

In today’s economy, companies face the challenge of turbulent environments, which are characterized by rapid change, uncertainty, and unpredictability. Thus, for companies, these environments can be a double-edged sword because they can be responsible for rapid development opportunities and threats that can lead to organizational obsolesce. Businesses can lose their competitive advantage rapidly if they do not adapt to environmental changes, therefore, companies need to reinvent themselves by either exploiting available capacity or exploring new capabilities.Innovative activities are beneficial for improving organizational vitality, but it is not clear how can be designed an effective innovation strategy and a system, that can respond to environmental changes both externally and internally. Ambidextrous innovation can be a relevant solution to this problem because it gives companies the opportunity to counteract the loss of competitive advantage by using a mix of innovative exploratory strategy and innovative exploitative strategy. Nowadays, ambidextrous innovation theory has been widely adopted by researchers to explain how is formed the mechanism of organizational performance and competitive advantage. According to researchers, this can be achieved by efficiently combining available, tangible, and intangible resources in the production and marketing of goods and services.The paper aims to clarify some aspects less addressed in the literature and to highlight the importance of innovative managerial strategies for using intangible resources to increase sustainable competitive advantage and company value, in terms of theoretical and empirical studies, conducted at national and international level. Thus, the author proposes a theoretical research model based on the premise that both the sustainable competitive advantage and the market value of a company can be influenced by the way intangible resources are used in innovative exploitation and exploratory strategies.