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Solutions to the Exploration/Exploitation Dilemma: Networks as a New Level of Analysis

Solutions to the Exploration/Exploitation Dilemma: Networks as a New Level of Analysis



This paper reviews the extant literature on the exploration/exploitation dilemma. Based on a systematic analysis of structural, behavioural, systemic and temporal solutions, the authors are able to ...

This paper reviews the extant literature on the exploration/exploitation dilemma. Based on a systematic analysis of structural, behavioural, systemic and temporal solutions, the authors are able to show that the learning literature continues to struggle with the question of how exactly an organization can separate exploration and exploitation and at the same time enable necessary knowledge exchange and cooperation between these
two notions. Paying closer attention to networks might enable future research to answer this question. In particular, a combination of structural aspects of networks and social ties has the potential to explain how the solutions currently on offer can be implemented successfully, how organizations can combine several of them, and how they can shift between them.



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    Solutions to the Exploration/Exploitation Dilemma: Networks as a New Level of Analysis Solutions to the Exploration/Exploitation Dilemma: Networks as a New Level of Analysis Document Transcript

    • Solutions to the Exploration/Exploitation Dilemma: Networks as a New Level of Analysis Christian Stadler, Tazeeb Rajwani1 and Florence Karaba2 Warwick Business School, Coventry CV4 7AL, UK, 1 School of Management, Cranfield University, Bedfordshire MK43 0AL, UK, and 2 School of Management, University of Bath, Bath BA2 7AY, UK Corresponding author email: christian.stadler@wbs.ac.uk This paper reviews the extant literature on the exploration/exploitation dilemma. Based on a systematic analysis of structural, behavioural, systemic and temporal solutions, the authors are able to show that the learning literature continues to struggle with the question of how exactly an organization can separate exploration and exploitation and at the same time enable necessary knowledge exchange and cooperation between these two notions. Paying closer attention to networks might enable future research to answer this question. In particular, a combination of structural aspects of networks and social ties has the potential to explain how the solutions currently on offer can be imple- mented successfully, how organizations can combine several of them, and how they can shift between them. Introduction Ever since March (1991) published his seminal article on exploration and exploitation, scholars have discussed how organizations, teams and individuals can both explore for new knowledge and exploit existing knowledge. As a variety of literature streams such as organizational learning, technological inno- vation, organizational adaptation, strategic manage- ment and organizational design built on March’s initial idea, both contradicting and complementary solutions to the exploration and exploitation dilemma emerged (Raisch et al. 2009). In this paper, we concentrate on the organizational learning litera- ture when reviewing solutions to the exploration/ exploitation dilemma and ask how a focus on individual, team and organizational networks will help us to solve some of the issues emerging from this literature. Network theory has already been applied by scholars looking at exploration and exploitation in alliances (Atuahene-Gima and Murray 2007; Lin et al. 2007; Simsek 2009; Yamakawa et al. 2011), but a broader application provides a unique opportunity to clarify how firms can implement solutions to the exploration/ exploitation dilemma in general. In particular, it helps us to understand how an appropriate level of integration can be maintained despite the required separation between exploration and exploitation. We review the exploration and exploitation litera- ture, as it continues to receive considerable attention. Since March’s (1991) article, 661 journal articles have been published, 448 in the past five years alone (ISI Web of Knowledge, January 2012). There have also been four particularly important review articles discussing the exploration/exploitation dilemma: Gupta et al. (2006), Lavie et al. (2010), Raisch et al. (2009) and Raisch and Birkinshaw (2008). A recent review by Turner et al. (2012) also highlights the ongoing interest in this topic. These reviews provide a good overview of antecedents, structural and behavioural approaches to achieving a balance bs_bs_banner International Journal of Management Reviews, Vol. *, *–* (2013) DOI: 10.1111/ijmr.12015 © 2013 The Authors International Journal of Management Reviews © 2013 British Academy of Management and John Wiley & Sons Ltd. Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA
    • between exploration and exploitation, as well as per- formance implications. However, the focus of these reviews is primarily on the firm level. We intend to make a contribution by moving beyond these reviews by first analysing existing solu- tions to the exploration/exploitation dilemma and then introducing networks as an additional level of analysis. That said, the learning literature concen- trates primarily on different solutions that enable a separation between exploration and exploitation. However, the key question that remains unaddressed is how firms should ensure an appropriate level of integration despite this necessary separation. This paper suggests that network ties and structure help us to understand this issue better. More specifically, per- sonal networks are of interest in the context of the learning literature. For example, a firm that decides to structurally separate exploration and exploitation could ensure an appropriate level of integration through a combination of weak ties between specific employees in the separate units and strong ties between managers in charge of those units (Krackhardt 1992). This does not threaten the sepa- ration required to foster exploration and exploitation, but it ensures that knowledge exchange is still pos- sible. Without such ties, it is very probable that newly developed knowledge will not be successfully exploited. In this review, we can provide some indi- cation of how such networks facilitate the different solutions to the exploration/exploitation dilemma, but further empirical research is required to test our ideas. In the following section, we first describe the research process, followed by a review of the learning literature and a review of networks in exploration and exploitation. Thereafter, we describe how network theory can be applied to address the issues that previ- ous solutions to the exploration/exploitation dilemma do not address satisfactorily. In the final section, we define future research agendas through three main questions that emerge from this paper. Research method The intention of this review is to critically discuss the most influential contributions to the exploration and exploitation literature and attempt to explain how attention to individual, team and organizational net- works can contribute to this field. We base the selec- tion of articles relevant to the review on ISI Web of Knowledge. The database provides bibliographic information for over 1700 social sciences journals in more than 50 disciplines. In our analysis, we concen- trated on papers published in the Business and Man- agement categories in January 2012. In the first step, we searched for all articles pub- lished since March’s seminal 1991 article containing the words explor* and exploit* in their titles, abstracts or keywords. This yielded a set of 661 arti- cles, of which 467 were cited at least once. In a next step, we wanted to identify the core studies of the exploration/exploitation literature. Previous studies have done this by setting a citation threshold, e.g. the 100 most cited papers or those with at least 50 cita- tions (e.g. Acedo et al. 2006; Ramos-Rodríguez and Ruíz-Navarro 2004). We decided to set a more objec- tive criterion and included all those articles with above mean annual citations. This avoids a bias towards older contributions, which are more likely to have a higher number of total citations. There were 145 articles that had at least 2.5 citations a year, i.e. above mean annual citations. In the last step, two authors read all these articles to determine whether they were indeed concerned with our core question of how firms balance explo- ration and exploitation.1 In cases where they disa- greed, the third author was consulted. In total, we found 55 articles which constitute the core of the review. Of these articles, 20% are from Organization Science, 15% from the Strategic Management Journal, 9% from the Academy of Management Journal and the Journal of Management Studies, 7% from Management Science, and 5% from Research Policy. It is important to note that we moved beyond this core literature in two ways. First, these core articles cite other contributions that cannot be ignored when discussing their suggestions. Some propositions in the learning literature are rooted in older literature streams. In order to understand them fully and to do justice to these earlier contributions, we included older literature where appropriate. For example, when we discuss contextual ambidexterity, we have to refer to an older literature stream suggest- ing the creation of a formal primary structure addressing routine tasks and a secondary structure such as networks taking up non-routine tasks (Bushe and Shani 1991; McDonough and Leifer 1983; Stein and Kanter 1980; Zand 1974), as the learning litera- ture built on this idea. 1 In some cases it was possible to determine this already from the abstract. 2 C. Stadler et al. © 2013 The Authors International Journal of Management Reviews © 2013 British Academy of Management and John Wiley & Sons Ltd.
    • Secondly, we depart from the core literature when we introduce networks as an additional level of ana- lysis to the learning literature. Although some cita- tions focusing on networks would also feature in our body of core learning literature, networks can only be described in an appropriate way by moving beyond this literature. We do not conduct a systematic review of network theory though, as we are interested in solutions to the exploration/exploitation literature, but link and redirect the core concepts from the network literature to identify new directions open to scholars interested in exploration and exploitation. In short, while 43 articles from the core studies of our review are cited, various articles outside the core are also included in order to fully explain solutions that emerge from those key studies and to point in fruitful directions to advance this growing field. The reference list indicates the core articles using an asterisk. Research on exploration and exploitation: levels of analysis and findings According to March (1991), exploitation is defined as ‘refinement, choice, production, efficiency, selec- tion, implementation and execution’ and exploration as ‘search, variation, risk-taking, experimentation, play, flexibility, discovery, and innovation’ (p. 71). There has been a debate about how exactly this should be interpreted. In this review, we take the position that both exploration and exploitation are associated with some form of learning and innova- tion (e.g. Baum et al. 2000; Benner and Tushman 2002; Gupta et al. 2006; He and Wong 2004), but acknowledge that scholars also characterize exploi- tation purely as using past knowledge, i.e. an absence of learning (e.g. Vassolo et al. 2004; Vermeulen and Barkema 2001). We embrace the interpretation as a continuum, as it seems more logical that we never replicate exactly the same knowledge twice and, therefore, all activities require at least some learning. Further, the conceptualization of the two constructs as independent activities and subsequent separate measurements (e.g. Auh and Menguc 2005; He and Wong 2004; Jansen et al. 2009; Katila and Ahuja 2002) might underestimate their interdependent nature, which lies at the heart of the question of how a balance can be achieved. The issue of balance emerges as exploration and exploitation activities are subject to resource con- straints, resulting in a trade-off situation. As an organization has limited resources, it faces a choice of which activities to invest in. If it decides to invest heavily in exploitation, it has fewer resources avail- able for exploration and vice versa. This results in an inherent tension as the leveraging of existing capa- bilities leads to more immediate results and the development of new capabilities promises future advantages (Leonard-Barton 1995). Therefore, organizations need to explore to create new opportu- nities to exploit, and it needs to exploit to generate income to invest in exploration. As March explains adaptive systems that engage in exploration to the exclusion of exploitation are likely to find that they suffer the costs of experimentation without gaining many of the benefits . . . Conversely, systems that engage in exploitation to the exclusion of explora- tion are likely to find themselves trapped in sub- optimal stable equilibria. (March (1991, p. 71) The fact that there is a trade-off does not imply that organizations cannot pursue both activities. While some empirical evidence highlights the difficulty in achieving this, as they report a negative correlation between exploration and exploitation (Andriopoulos and Lewis 2009; Van Deusen and Mueller 1999), others find positive correlations (Rothaermel and Deeds 2004; Taylor and Helfat 2009). To some extent, this might be due to complementary effects that have not received sufficient attention in the past. Cao et al. (2009) note that the repeated use of exist- ing knowledge might create a better understanding of where resources reside in an organization, facilitat- ing various reconfigurations of knowledge and resources (Kogut and Zander 1992). In other words, a trade-off situation might be inevitable in firms that are relatively resource constrained, but not in others. This also points to a lack of clarity in what exactly we mean by balancing exploration and exploitation. One dimension of this consideration could be the relative amount of exploration compared with exploitation, while a second dimension might focus on the com- bined magnitude of the two (Cao et al. 2009). Both are likely to have an impact on performance, but empirical investigations do not deliver a precise dis- tinction, and therefore make it impossible to judge which is prevalent. In the following, we review the main solutions that previous literature offers to the exploration/ exploitation dilemma. In contrast to the ambidexter- ity literature, we are not only looking at simultaneous Exploration/Exploitation Dilemma 3 © 2013 The Authors International Journal of Management Reviews © 2013 British Academy of Management and John Wiley & Sons Ltd.
    • solutions within a firm, but also considering how firms can balance exploration and exploitation on the macro level and across time. Researchers have pre- viously discussed solutions with an emphasis on the organizational and individual levels and, to a lesser extent, on the team level of analysis in this field. Table 1 explores and integrates the structural, behav- ioural, systematic and temporal solutions with indi- vidual, team and organizational levels of analysis. The table provides scholars working in the field with a comprehensive overview and gaps in the various mechanisms in the different solutions in exploration and exploitation. Building on the table and our systematic review of the main solutions from the literature, we show how the field has moved forward (Raisch et al. 2009), but an important question is also left to be answered: How can firms keep an appropriate level of integration (i.e. sufficient knowledge flow) between exploration and exploitation, especially across networks at individual, team and organiza- tion levels? With this in mind, before explaining network levels, the following sections will map the intellec- tual terrain for each of the four solutions for a better understanding of exploration/exploitation across individual, team and organizational levels. There- after, we focus on the network level of analysis to deal with the issues arising from the learning literature. Structural solution (structural ambidexterity) Structural ambidexterity (He and Wong 2004; Jansen et al. 2009; Tushman and O’Reilly 1996) builds on the assumption that organizational units reflect the specific requirements of their task environments that cannot be achieved under the same strict regime (Lawrence and Lorsch 1967). We can deduce from these previous studies that exploration and exploita- tion should be spatially separated. A study by Christensen (1998) argues that the organizational processes, structures and cultures of a large estab- lished firm are suited to exploiting existing technolo- gies, but will fail to adjust to disruptive new technologies unless they establish separate units, pref- erably at a different location. Such units focusing on exploration would operate in fundamentally distinc- tive learning contexts with different incentive systems, procedures and managers that are appropri- ate for the required tasks (Taylor and Helfat 2009). Compared with explorative units, exploitative units tend to be larger and more centralized, emphasizing efficiency and control (Benner and Tushman 2002, 2003). Several theoretical contributions favour loosely coupled organizations with a strong separation (Leonard-Barton 1995; Levinthal 1997). What is missing though is empirical evidence that this solution works. Most contributions are anecdotal, focusing on successful case studies (O’Reilly and Tushman 2004; Tushman and O’Reilly 1996). What became obvious from these contributions is the criti- cal role that top management plays in coordination. While the processes, culture and tasks are coherent within both the explorative and exploitative units, there is a tension on the organizational level that needs to be both recognized and reconciled (Eisenhardt and Martin 2000; O’Reilly and Tushman 2004), a task that usually has to be achieved by top management (Andriopoulos and Lewis 2009; Mom et al. 2007, 2009; Smith and Tushman 2005). Adler et al. (2009), for example, explain that only a weekly cross-unit editorial meeting connected USAToday with an exploratory dotcom business. While the top management team is likely to be crucial, future research needs to identify other mechanisms that enable coordination across these units. A particular issue is that ‘integration’ has to happen on an oper- ational level where top management has limited involvement. Fang et al. (2010) propose that organ- izations divided into semi-isolated subgroups are best able to strike the balance. Their simulation study shows that moderate levels of cross-group linking allow promising ideas to be shared across groups but do not reduce organizational diversity substantially. These findings are robust under various conditions, such as problem complexity, environmental dyna- mism and personnel turnover. However, the way the links are established is not exactly clear in this study. Human resource (HR) systems might play an impor- tant role, e.g. a job rotation system that provides employees with experience that helps them to under- stand both explorative and exploitative groups. Another mechanism could be incentive systems. While structural ambidexterity literature suggests that procedures and cultures should be separated, there might still be some meaningful integration in terms of network levels (O’Reilly and Tushman 2004). Firms might develop specific resources and capabilities that enable the reconciliation, but without appropriate mechanisms in place, a struc- tural separation of exploration and exploitation is unlikely to create sufficient coordination. To be able 4 C. Stadler et al. © 2013 The Authors International Journal of Management Reviews © 2013 British Academy of Management and John Wiley & Sons Ltd.
    • Table1.Solutionstotheexploration/exploitationdilemmaandinsightsondifferentlevelsofanalysis IndividualTeamOrganizationand interorganization UnsolvedIssues Structuralsolution:Firm createsseparate explorativeand exploitativestructures Topmanagerscoordinateand reconcileexplorativeand exploitativeunits Teamlevelreceiveslittle attentionintheliterature Exploration/exploitationdilemmais solvedontheorganizationallevel withestablished interorganizationallinks supportingexploitationandnew onesexploration –Howcanfirmsensuresufficientcooperation betweenexplorativeandexploitativeunits? –Istheintegrationonthetopmanagementlevel sufficient? Behaviouralsolution: Individualsandteams switchbetween explorationand exploitation Whiletopmanagersset incentivesystems individualsatlowerlevels decidewhentoswitch betweenexplorationand exploitation Exploration/exploitation dilemmaissolved primarilyontheteamlevel Organizationsdevelopcontext(e.g. routines,incentivestructures)that enableindividuals/teamsto decidewhentoexploreorexploit –Canexplorationandexploitationoccurinthe samesubsystem? –Howcanindividualsdecidedwhenexploration (orexploitation)isappropriate? Systemicsolution:Firm specializesinexploration orexploitation Boundedrationalitysuggests thatspecializationof individualsmakessense, butalsohighlights subsequentdifficultyto absorbnewknowledge Teamlevelreceiveslittle attentionintheliterature Specializationavoidsconflictand coordinationandispossibleif otherorganizationsdevelop mutuallycomplementary resources –Howcanexploitersgetaccesstonew knowledge? Temporalsolution:Firmhas periodsofexplorationand periodsofexploitation Owingtoboundedrationality andavoidanceofgoal conflictsindividualsbest concentrateonexploration orexploitationatagiven time Teamlevelreceiveslittle attentionintheliterature Organizationsproactivelymanage transitionbetweenexplorationand exploitationwith interorganizationaltiesfacilitating theshift –Howcanfirmsmanagethetransitionfrom explorationtoexploitationandviceversa? Exploration/Exploitation Dilemma 5 © 2013 The Authors International Journal of Management Reviews © 2013 British Academy of Management and John Wiley & Sons Ltd.
    • to prove the feasibility of a structural solution, further research is required that pays closer attention to the coordination of exploration and exploitation, moving beyond an explanation that hinges entirely on top managers and the networks of top managers. Behavioural solution (contextual ambidexterity) Gibson and Birkinshaw (2004) define contextual ambidexterity, as ‘the behavioural capacity to simul- taneously demonstrate alignment and adaptability across the entire business unit’ (p. 209). Using Bartlett and Ghoshal’s (1986) characterization of context as a combination of stretch, discipline, support and trust, they explain that leaders can use these to support individuals who choose when explorative or exploitative conduct is appropriate. Contextual ambidexterity builds on a literature that suggests that formal primary structure can address routine tasks and a secondary structure such as net- works can take up non-routine tasks (Bushe and Shani 1991; McDonough and Leifer 1983; Stein and Kanter 1980; Zand 1974). In stark contrast to structural solutions, this solu- tion has less of an issue in terms of coordination. Adler et al. (2009) argue that firms are able to inter- act throughout the organization to enhance opera- tions. More importantly, scholars have long recognized that meta-routines and job enrichment schemes (Adler 1999), the ability of leaders to guide behaviour (Denison et al. 1995; Lewis 2000) and the shared vision (Bartlett and Ghoshal 1989) are differ- ent mechanisms that enable this interaction between people and across the firm. Other related constructs relevant to contextual ambidexterity describe manag- ers as being important, as they can focus their atten- tion either on feed-forward control systems, i.e. developing values and scanning opportunities and threats to enhance exploration, or feedback control systems, i.e. specifying boundaries and measuring and rewarding appropriate R&D to enhance exploi- tation (McCarthy and Gordon 2011). Similarly, Lubatkin et al. (2006) have also emphasized the role of top management teams in balancing exploration and exploitation. Although contextual ambidexterity is an attractive proposition and Gibson and Birkinshaw (2004) provide some empirical support, we still remain fairly critical of the solution. If exploration and exploitation are conceptualized as mutually exclu- sive ends of a continuum, it is not possible that they can be reconciled within a subsystem, let alone by a single individual (Bushe and Shani 1991; Inkpen and Tsang 2005). Even in a less categorical conceptuali- zation, the different routines that are required for the separate tasks prohibit a swift shift between them. Finally, contextual ambidexterity may not deal with disruptive new ideas requiring radical new know- ledge (Christensen 1998), as it may only provide innovation along an established trajectory. In the end, the main question that arises from the contextual ambidexterity literature is quite similar to that faced by structural ambidexterity: How exactly can an organization find the right balance between coordination and separation of exploration and exploitation? While structural solutions face a par- ticular problem with integration, contextual solutions have more of an issue with separation. Systemic solution Systemic solutions are rooted in the assumption that a reconciliation of exploration and exploitation within one organization is not possible (Hannan and Freeman 1977; McGill et al. 1992; Miller and Friesen 1986) and therefore firms should specialize in one of the two activities.A balance is consequently achieved on a macro or system level, not within the organization (Gupta et al. 2006). One organization would specialize in exploration and another one in exploitation. Christensen (1998) suggests that, despite separate structures, an adjustment might not be possible. Similarly, bounded rationality suggests that individuals might not be able to handle both exploration and exploitation. Whether specialization is really a feasible option remains unclear (Denison et al. 1995). Certain conditions might be necessary. For example organizations need mutually com- plementary resources and a low degree of co-specialization in the separate sets of resources (Gupta et al. 2006). Even then, the question remains as to how rents could be shared. Similar to structural ambidexterity, the core issue is therefore which mechanism could make a systemic solution possible? To our knowledge, no empirical studies have been conducted yet to explore this ques- tion. A natural point of departure for future studies is previous work on exploration and exploitation in alliances. Here, firms rely on external partners to achieve a balance between exploration and exploita- tion (Baden-Fuller and Volberda 1997; Hill and Birkinshaw 2008; Lavie and Rosenkopf 2006; Rothaermel and Deeds 2004). It is a widely used approach as external knowledge acquisition requires 6 C. Stadler et al. © 2013 The Authors International Journal of Management Reviews © 2013 British Academy of Management and John Wiley & Sons Ltd.
    • fewer resources than internal knowledge creation (Cassiman and Veugelers 2006; Cohen and Levinthal 1990). We know that firms scan their environment to recognize and assimilate knowledge (Arbussà and Coenders 2007; Daft and Weick 1984; Zahra and George 2002), i.e. they engage in external explora- tion. IBM, for example, acquired substantial new knowledge that allowed the change from a hardware manufacturing company to a global service provider through new alliance partners (Dittrich et al. 2007). A particularly common form of explorative alliances in research intensive industries is formed between firms and university research centres (Bierly et al. 2009). We also know that firms exploit their know- ledge externally, e.g. in alliances (Benner and Tushman 2003; Colombo et al. 2006; Rothaermel 2001; Rothaermel and Deeds 2004; Teece 1992) or through licensing. Kodak, for example, exploited its knowledge of digital scanning and colour manage- ment software technology in an alliance with Heidel- berger Druckmachinen AG (Grant and Baden-Fuller 2004). In other words, there is wide agreement that external exploration and exploitation efforts help firms to achieve the overall balance, but at the same time there is little research to explain how this happens exactly (Lichtenthaler 2009). Those scholars that undertook research on the balance of internal and external knowledge primarily leverage the absorptive capacity literature (Cohen and Levinthal 1990), a natural fit considering the focus on knowledge acquisition (Sun and Anderson 2010). Taking an absorptive capacity perspective, the combination of internal exploration and external exploitation should have a positive effect on the per- formance of a firm, i.e. can result in a successful balance. Exploitative alliances, for instance, have relatively low coordination costs, as they focus on incremental improvements in current products and processes, which allow partners to leverage existing complementarities (Benner and Tushman 2003; Teece 1992). This increases project completion speed (Azoulay 2004; Mowery et al. 1996). Rather than exchanging scientists working together on projects – as explorative alliances would require – firms can concentrate on managing the interface. As internal exploration helps firms to develop absorptive capac- ity (Cohen and Levinthal 1990; Garud and Nayyar 1994; Lane and Lubatkin 1998; Zahra and George 2002), it positively moderates the already positive impact of exploitative alliances on performance (Hoang and Rothaermel 2010). Besides the success- ful intake of external knowledge, internal exploration also ensures that the firm is not locked into an exploi- tation trap (March 1991). The combination of internal exploitation and external exploration, however, seems problematic from an absorptive capacity perspective. Firms without internal exploration cannot develop absorp- tive capacity. This means that they are unable to scan and transform new outside knowledge, and therefore will be unable to exploit fully the knowledge they should be able to access as a result of their external exploration efforts. For a systemic solution, this insight presents a challenge for firms specializing in exploitation. Are there mechanisms that enable firms to remain successful exploiters? Some anecdotal evi- dence suggests that some large long-lived firms have specialized in exploitation and are able to overcome exploitation traps through occasional acquisitions (Stadler 2007). In general, the alliance literature provides some clues that a macro solution to the exploration/ exploitation dilemma might be possible, but it pro- vides limited insights into different network mechanisms and individual levels that enable such a solution. Exceptions are some recent work on the brokering roles of managers (Hargadon 2002a) and other resources required for establishing the rela- tional context that enables knowledge flow (Adler and Kwon 2002; Nahapiet and Ghoshal 1998). For instance, Jones (2006) draws attention to the impor- tance of gatekeepers, boundary spanners and change agents in a case study of a mature manufacturing firm based in North Wales. How exactly firms spe- cializing in exploration connect with firms specializ- ing in exploitation is not yet established and needs further attention. Moreover, we are missing a detailed understanding of the network mechanisms enabling both separation and integration to an appro- priate degree. Temporal solution Temporal solutions to the exploration/exploitation dilemma are grounded in the literature on punctuated equilibrium, which suggests that long periods of stability are followed by short bursts of change (Romanelli and Tushman 1994; Tushman and Romanelli 1985), leading to a balance over time and not at any given point in time. While temporal sepa- ration of activities is not new, the application to the exploration/exploitation literature has been relatively recent (Simsek et al. 2009). According to this solu- tion, organizations cycle back and forth between the Exploration/Exploitation Dilemma 7 © 2013 The Authors International Journal of Management Reviews © 2013 British Academy of Management and John Wiley & Sons Ltd.
    • two concepts. As McCarthy and Gordon (2011, p. 255) explain. ‘the balancing of exploitation– exploration tensions is much like riding a bike – it requires a continuous and irregular shifting of control system use over time’. An earlier study by Levinthal and March (1993) explains that ‘the sequential allocation of attention is generally viewed as an outcome of goal conflict and bounded ration- ality, it also results in a simplification of experiments in organizational change’ (p. 98). Based on this earlier work, Gilsing and Nooteboom (2006) develop a theoretical framework in which exploration and exploitation build on each other. According to their research, exploitation starts when the variety of knowledge that emerges from exploration is reduced. As the dominant design emerges, rapid diffusion is enabled by more codified knowledge. Temporal solu- tions assume that organizations proactively manage the transition between periods (Siggelkow and Levinthal 2003). While they avoid the conflicting pressures of simultaneous solutions, the shift is, however, not trivial, considering that these conflicts do not simply disappear at the time of transition (Lavie et al. 2010). Hence, despite the theoretical appeal of this concept, the lack of empirical literature poses the question of how feasible a temporal solu- tion is in practice. Currently, we simply do not have a good under- standing of the mechanisms that organizations use to enable a temporal separation between exploration and exploitation. In particular, quantitative empirical work is still sparse. An exception is an article by Rothaermel and Deeds (2004), which shows that biotech firms first form exploration alliances to dis- cover new knowledge and then engage in exploitative alliances. Some descriptive accounts such as Burgelman’s (2002) work on the transformation of Intel also indicate that temporal solutions are prom- ising. And Eisenhardt and Brown (1997) present case studies of six computer firms that develop semi- structures to facilitate their transition. Future research has to focus in more detail on such mecha- nisms to demonstrate how temporal solutions can be implemented. Another area of future research regarding tempo- ral solutions is context. Surprisingly, context has been widely ignored in this literature. This seems odd, considering that shifts between exploratory and exploitative periods are likely to be in sync with contextual factors. An investigation of the link between context and shifts between exploration and exploitation might clarify why some firms pursue such a temporal solution and whether particular industries are more suitable for such an approach than others. Finally, the temporal aspects should also be studied in combination with structural and behav- ioural solutions. Firms might strive for a balance between exploration and exploitation both simulta- neously and sequentially. While many organizations might attempt to balance exploration and exploita- tion simultaneously, they also operate in changing environments and, therefore, are likely to require dif- ferent levels of balance at different points in time. As the environment–strategy co-alignment literature (Andrews 1980) suggests, firms need to co-align their internal structures and processes to fit changes in the external environments (Lawrence and Lorsch 1967). Therefore, they constantly need to adapt the levels of exploitation and exploration to the environ- ment’s requirements. Different solutions have not yet been studied in combination, but represent a logical next step to further understanding of exploration and exploitation. Furthermore, with all these distinctive solutions discussed, it begs the question, where do networks fit into this growing field, especially in rela- tion to different levels? From individuals, teams and organizations to networks of individuals, teams and organizations As shown above, the learning literature offers differ- ent solutions to the exploration/exploitation dilemma, which have some specific features in terms of explo- ration or exploitation. These studies have focused mainly on how a balance can be achieved on the organizational level. Whether this requires attention to other levels of analysis still remains secondary and superficial in the current literature. Moreover, we find that individuals, and particularly top managers, are seen as crucial coordinators in all four solutions. The team level of analysis receives considerably less atten- tion in this field. Only scholars interested in contex- tual ambidexterity seem to refer to this level of analysis sufficiently. This is problematic, as we find that the current theoretical frameworks used to inves- tigate ‘integration’do not allow us to see whether they are really able to do this. In fact, it seems that com- plementary mechanisms have not received appropri- ate attention in this field. While this might not be an issue, we have some indication that groups also provide important secondary coordination when organizations opt for structural, systemic or temporal solutions (e.g. Fang et al. 2010). 8 C. Stadler et al. © 2013 The Authors International Journal of Management Reviews © 2013 British Academy of Management and John Wiley & Sons Ltd.
    • Overall, the learning literature struggles with the question of how exactly an organization can separate exploration and exploitation and at the same time enable necessary knowledge exchange and coopera- tion between these notions. In other words: which mechanisms might enable separation and integra- tion? Paying closer attention to networks might enable future research to answer this question. Rather than looking at individuals, teams and organizations, scholars should pay more attention to individual, team and organizational networks. The following section reviews how the literature uses the network level of analysis in regard to exploration and exploitation. Research on networks in the exploration/exploitation literature The core proposition of this paper is to use networks as an additional level of analysis to gain a better understanding of the link between exploration and exploitation (Lazer and Friedman 2007), and there- fore be able to address the question of how firms are able to achieve appropriate separation and integra- tion of the two notions. The individual actors, teams and organizations are the nodes of these networks. Lazer and Friedman (2007) examined how structures of social networks among individuals and teams can affect performance. They looked at individuals dealing with complex problems in exploration and exploitation. Using computational modelling, they found that efficient networks positively affect infor- mation diffusion, which ultimately has a positive impact on performance. Overall, this study suggests that more work needs to be done to explore diverse individual and team behaviours in different networks in exploration and exploitation studies. Building on that important study, we use a gener- alized definition of social network capital, drawing directly from network theory and resource-based lit- eratures (Adler and Kwon 2002; Nahapiet and Ghoshal 1998). Bourdieu is often quoted in defining social network capital as ‘resources that result from social structure’ (Bourdieu and Wacquant 1992, p. 119, expanded from Bourdieu 1980). Building on that view, we define ‘network capital’ as the combi- nation of social ties and the tangible and intangible benefits that flow to the firm or individuals as a result of these ties. In the following section, we review how the litera- ture used interorganizational, organizational, team and individual networks in the context of exploration and exploitation so far. This summarizes existing insights into networks in regard to exploration and exploitation, and lays the ground for a more detailed discussion of how the network level of analysis can address some of the issues that emerged from our review of four solutions to the exploration/ exploitation dilemma. Organizational and interorganizational level networks in exploration/exploitation At times, organizations that explore and exploit are seen as functioning within a dense network of coop- erating and competing firms (Turner et al. 2012). In these networks, organizations are using their strate- gic business units to initiate, import, modify and disperse new knowledge and technologies (Jansen et al. 2012; Simsek et al. 2003, 2009). For these organizations to achieve superior performance, it is important that they are able to allocate these resources between exploration and exploitation in a consistent way (Lavie et al. 2010). Gupta et al. (2006) clearly accepted the importance of organiza- tional levels in exploration and exploitation, although their review did not attempt specifically to articulate the interorganizational network conditions under which balance might be viable for effective long-term survival. In keeping with this observation, we find that few scholars have investigated exploration and exploita- tion through interorganizational knowledge sharing, competition and increased collaboration (Brown and Duguid 2000; Tsai 2002; Yamakawa et al. 2011). Studies in this area have found that speed and increased coordination between organizations depend on network structures, but the various inter- organizational network structures in exploration and exploitation need further attention (Cao et al. 2009; Tsai 2002). These networks (i.e. technology network) help each partner to absorb the skills and coordinate complex systems provided there are formal struc- tures, including centralization, formalization and specialization (Tsai 2002). While network structure captures the potential for organizational knowledge sharing, Murray (2002) articulates that the concept of networks of organiza- tions entails resources to be embedded within and move across the boundaries of organizations. These movements of resources across two or more organ- izational networks using relationships possessed by business units may potentially help to affect Exploration/Exploitation Dilemma 9 © 2013 The Authors International Journal of Management Reviews © 2013 British Academy of Management and John Wiley & Sons Ltd.
    • exploration or exploitation (Kostova and Roth 2003; Simsek et al. 2009). Other exploration and exploita- tion studies equate organizational networks more closely with the benefits derived from aggregate rela- tionships, such as faster exploitation or deep collabo- ration in the organization to innovate (Owen-Smith and Powell 2004; Powell 1990). We can see that relationships matter in sharing knowledge and coordinating efforts across organiza- tional networks, but age of organizational network also affects exploration and exploitation, as firms have more resources over time. Voss and Voss (2013) suggest that older firms have larger networks to realize the benefits of exploration and exploitation. Moreover, older organizations gain more experience over time and develop new products to a market, as they are likely to network more with customers, sup- pliers and consultants to exploit those larger relation- ship pools better (Ritter and Gemünden 2003). Moreover, advanced networked firms in terms of age also interact more with universities, which helps firms to develop new knowledge (Owen-Smith et al. 2002). However, Gemünden et al. (1992) did find, in a study of 4564 firms, that network interactions for exploration between firms, customers, suppliers and universities showed a lower capability for realizing innovations. It is seen from these studies that the issue of age and size of organizational networks needs further attention at this level of analysis. In sum, the literature on organizational networks clearly implies the importance of such networks. While scholars are divided on the exact effects, the overall impression is that such networks are benefi- cial when firms attempt to balance exploration and exploitation. How exactly organizational networks achieve this is less obvious so far. Future research can build on exiting work to gain a better understand- ing of the effect of network structure and strength of ties – an area we see as central in an attempt to achieve both integration and separation between exploration and exploitation. Team-level networks in exploration/exploitation Teams can explore and exploit technologies to enhance performance, which still depends in part upon the strength of network ties between team members (Turner et al. 2012) and senior manage- ment teams (Cao and Simsek 2010; Lavie et al. 2010). There are two primary inputs into the strength of ties between teams. First, teams have a set of resources and skills from their business positions, and this determines the amount of exploration and exploitation under certain conditions (Perez and Sanchez 2002; Simsek et al. 2009; Vera and Crossan 2004). Second, with regard to a company’s network ties to innovate, we consider the characteristics of these team networks in terms of density and struc- tural holes as affecting the team’s quality of ties and benefits that it might receive (Ferrary 2003; Lazer and Friedman 2007). Studies have found that the team network centrality and structural equivalence are important factors in explaining variance of network capital, which can either improve or discour- age innovation and knowledge creation (Jansen et al. 2006). However, the characteristics of a team’s exploration and exploitation networks – as well as its employees’ position within those networks – are likely to affect the quality of its ties with other teams to the benefit of the information flow from those relationships (Beckman 2006; Fang et al. 2010). These benefits may include new knowledge exchange, invitations to important meetings about new products and collection of new ideas (Kash and Rycroft 2002). Kash and Rycroft (2002) broadly demonstrate, using six case studies, that teams that simultaneous explore–exploit can be grouped into three defined patterns: transformation, the development of a new trajectory by a new coevolving team network to impact innovation; normal, the co-evolution of a proven team network to innovate technology along a proven path; transition, the co-evolutionary shift to a new path by an established team network. In other words, teams face the greatest challenges during those periods of movement from exploration to exploitation (Edmondson and Nembhard 2009; Rowley et al. 2000). These team-based studies in exploration/exploitation highlight the importance also of individual inputs (e.g. experienced based know-how and codified knowledge) within a team dynamic, which is also gaining momentum in this growing field (Jansen et al. 2012; Pittaway et al. 2004). In sum, the literature on team networks pays more attention to the strength of ties than work on organ- izational networks. It also more clearly integrates individual networks, indicating how crucial it will be for future research to look across different levels of analysis. How exactly team networks facilitate inte- gration and separation of exploration and exploita- tion when a firm opts for one of the four solutions offered in the learning literature again is subject to future research. 10 C. Stadler et al. © 2013 The Authors International Journal of Management Reviews © 2013 British Academy of Management and John Wiley & Sons Ltd.
    • Individual-level networks in exploration/exploitation The learning literature realizes the importance of individual interactive relationships in exploration/ exploitation (Andriopoulos and Lewis 2009). Build- ing on Smith and Tushman (2005), we urge other scholars to look more closely at the role of the indi- vidual actor networks in exploration/exploitation. More recently, scholars have, in fact, started to carve out the role of top management teams more clearly, but individuals or lower-level managers tend to be sidelined (Cao and Simsek 2010). That said, Floyd and Lane (2000), Jansen et al. (2008), Mom et al. (2009), Smith (2006) and Volberda et al. (2001), for example, have done interesting work highlighting the role of leaders and managers in shifting the resources in a way to facilitate the move from exploration to exploitation and back. Graebner (2004) highlights the role of leaders in situations when new technology and therefore new knowledge is integrated. Less attention so far has been on staff or actors in the lower end of the busi- ness networks. An exception is an article by Rothaermel and Hess (2007), which highlights the role of star and staff scientists in innovation, paving the way for work that looks more particularly at their role in balancing exploration and exploitation. Taylor and Helfat (2009) similarly look at the role of middle managers facilitating this process. Considering that in all potential solutions to balance exploration and exploitation the most important coordination roles hinge on individuals, we need a much stronger empirical base to under- stand the feasibility of these models in conjunction to individual networks. More importantly, what are the different types of relationships of individuals at different hierarchical levels? How do they ensure the transition or formation of these rela- tionships between exploration and exploitation? Is there a particular set of relationships that individuals need to manage a particular type of exploration/exploitation balancing strategy? In an attempt to lay the ground for future research, we will now discuss the potential impact of network ties and structure on the four solutions that the learning literature proposes to the exploration/ exploitation dilemma. While this touches upon net- works on organizational, team, and individual levels, we see most potential for individual networks. Implications: how networks address issues in the exploration/ exploitation literature In the previous two sections, we reviewed the learn- ing literature to identify unresolved issues and organizational, team and individual networks in exploration/exploitation. In this section, we want take the next step and discuss how these networks can address some of the issues identified in the learn- ing literature. The focus is particularly on how explo- ration and exploitation can be both separated and sufficiently integrated. We will do so by discussing structural, behavioural, systemic, and temporal solu- tions in turn. In each case we will review the existing literature, but by and large this section is speculative in the sense that we apply foundational insights from the literature on networks to develop new trajectories for future research. Structural solutions and networks Structural solutions to the exploration and exploita- tion dilemma provide an effective separation between the two notions, but do not sufficiently explain how integration can be achieved. As contri- butions using the network level of analysis do not specifically cover structural ambidexterity, more empirical studies of exploration and exploitation are required to understand how network ties and social capital foster either exploration or exploitation. Tiwana’s (2008) conceptionalization of network ties is insightful here to explicate its importance. Previ- ously, Burt (1992) had defined bridging ties as those ties that span structural holes. Building on those ideas, Tiwana (2008) explains that these types of ties provide access to novel insights which emerge when isolated perspectives are combined. Explorative units, therefore, need nodes with heterogeneous, non-redundant expertise (McEvily and Zaheer 1999). In contrast, Tiwana (2008) argues that a ‘network of collaborators with strong ties has greater capacity to implement innovative ideas’ (p. 251) – an important feature of exploitative units. In a similar manner, social ties foster either explo- ration or exploitation. Beckman (2006) studied the founding teams of 141 Silicon Valley firms and showed that those who previously worked at the same firm were more exploitative, and those coming from different firms are more explorative. This is particu- larly important, as ‘ how’ exploration and exploita- tion can be sufficiently integrated with the help of Exploration/Exploitation Dilemma 11 © 2013 The Authors International Journal of Management Reviews © 2013 British Academy of Management and John Wiley & Sons Ltd.
    • networks is not directly addressed in the literature on structural ambidexterity. The most obvious approach fits with the solution that emerges from our analysis of the learning literature and individual networks: using top managers (Andriopoulos and Lewis 2009; Mom et al. 2007, 2009; Smith and Tushman 2005). According to Beckman (2006), some founding teams of the Silicon Valley firms had a mixture of managers coming from the same and different firms. This created ambidextrous teams that were able to recon- cile exploration and exploitation, resulting in better performance. Interestingly, whether the social capital of top managers is sufficient to guarantee integration in firms opting for structural ambidexterity is also not yet clear. Future research could combine a structural view of network embeddedness with different rela- tional forms of social capital. Previous literature has suggested that bridging ties are crucial for the formal organization of explorative units, while strong ties will be crucial for the formal organization of exploitative units. This creates conditions that foster the separation of exploration and exploitation, but not yet the appropriate integration between the two. Therefore, as shown in Figure 1, it is perfectly feasi- ble that social ties connect the separate units and therefore guarantee a sufficient level of integration. Research by Gulati and Puranam (2009) suggests that this could be a fruitful direction for research, as informal organizational operation can complement formal structures, supporting ambidexterity. The ties between individuals remain intact, even if they are no longer in the same unit. Behavioural solution and networks The main issues identified in our systematic review of the literature deploying behavioural solutions are (1) the feasibility of exploring and exploiting in the same subsystem and (2) the concern that individuals need to know when and how to switch between the two notions. Other than for structural solutions, the issue here is not integration, but separation. Once again, there are no contributions that directly address these questions, but more general insights into networks provide a point of departure for future research. Beckman’s (2006) contribution suggests that managers responsible for making the switch between exploration and exploitation need to be ambidextrous, i.e. have social networks that provide them with access to both novel non-redundant know- ledge and with strong ties that enhance the imple- mentation of existing knowledge. Mom et al. (2007) argue in a similar manner when they stress the impor- tance of combining horizontal, bottom-up and top- down knowledge flows. Managers build networks that enable them to be ambidextrous (Mom et al. 2009) through participation in cross-functional inter- faces (Galbraith 1973; Gupta and Govindarajan 2000) and more generally when they have larger social networks (Jansen et al. 2006; Jaworski and Kohli 1993; Sheremata 2000). These networks allow them both to develop new and to refine existing com- petences (Floyd and Lane 2000), pursue radical and incremental innovations (Subramaniam and Youndt 2005) and find new solutions (Sheremata 2000) as much as reinforce existing beliefs and decisions Figure 1. Structural solution and networks 12 C. Stadler et al. © 2013 The Authors International Journal of Management Reviews © 2013 British Academy of Management and John Wiley & Sons Ltd.
    • (Rivkin and Siggelkow 2003). Mom et al. (2009) speculate that, beyond a certain level, the connected- ness of managers will increase the density of their networks and therefore create strong norms, establish shared behavioural patterns, and a dominant logic, which stifle exploration, but do not find support for this. Future research may explore and expand on that study, as insights from the learning literature (Christensen 1998) suggest that radical innovation is difficult to achieve without structural separation. Therefore, the likelihood that dense networks within units will stifle exploration seems highly likely in this scenario. In regard to the type of ties required, Tiwana’s (2008) analogy is also relevant in the context of behavioural solutions. He explains that a project team that simultaneously possesses strong ties and bridging ties will have access to a diverse array of specialized knowledge, perspectives, and skills and have the mechanisms to integrate that knowledge at the project level. This combination of tie characteristics is what Burt (1992) would describe as an ideal configuration. (Tiwana 2008, p. 259) In other words, both exploration and exploitation will be enabled (see Figure 2). Besides the social capital and nature of ties of managers, their position within a network will also affect their ability to manage ambidexterity (see Figure 2). Individuals at the center of a network are more likely to benefit from knowledge spillovers and receive more information from peripheral actors. This should facilitate exploration up to a point where the amount of information is overwhelming (Simsek 2009). At the same time, a central position in the network is also likely to facilitate exploitation, as actors should be able to make better decisions about whether they should exploit as a result of having an overview across the network. Actors at a more peripheral position in a network are less likely to have the information that is required to decide when to switch from exploration to exploitation (Burt 2001). It puts them in a position to disseminate new ideas and behaviours across the social structure, though, increasing opportunities for learning and creativity (Burt 2001). Future research may provide new insights how behavioural solutions can be implemented by considering network centrality at the same time as the nature of ties and social capital of managers. Systemic solution and networks According to this review, the main issue that sys- temic solutions face is the integration of exploration and exploitation. Structural solutions are also con- fronted with this, but the problem is more prominent here, as no management coordinates different units. It is not clear how pure exploiters can develop absorptive capacity that enables them to recognize promising new knowledge. The initial impression is that no solution can be provided, as exploration firms require an abundance of structural holes and bridging/weak ties (Burt 1992; Granovetter 1973), while exploitation firms require strong ties and dense networks to gain access to existing knowledge. The alliance literature dem- onstrates that repeated cooperation with the same firms creates the strong ties that permit the enrich- ment of basic knowledge and technologies, i.e. Figure 2. Behavioural solution and networks Exploration/Exploitation Dilemma 13 © 2013 The Authors International Journal of Management Reviews © 2013 British Academy of Management and John Wiley & Sons Ltd.
    • enable efficient exploitation (Benner and Tushman 2003; Colombo et al. 2006; Rothaermel 2001; Rothaermel and Deeds 2004; Teece 1992), and co- operation with new partners provides access to de novo solutions and therefore enables exploration (Dittrich et al. 2007). As two firms can have either strong or weak ties with each other, it seems impos- sible to overcome this dilemma. Future research could study whether explorative firms gain access to new knowledge through bridging ties with other explorative firms, but also have strong ties to exploitative firms (see Figure 3). It is also feasible that strong ties enhance exploration, as they promote the exchange of high-quality knowledge and tacit knowledge (Uzzi 1996). This means that actors in different firms linked through strong ties develop a better understanding of processes and procedures and find it easier to share complex and tacit know- ledge. Hence strong ties can facilitate integration of exploration, an aspect that has previously been over- looked (McEvily and Marcus 2005). Another promising line of inquiry is outlined by Hargadon (2002b), who argues that knowledge- brokering organizations could play an important role here (see Figure 3). He studies management consult- ing and engineering design firms that gain access to knowledge through their extended networks and then reconfigure it for the specific need of another firm. We know that, while this does not eliminate the absorption issue, it does mitigate it. With this in mind, future studies may explore other interesting knowledge-intensive industries from public rela- tions, lobbying, HR search to IT outsourcing. Within these dynamic industries, scholars can combine social capital and structural aspects of networks to study whether they are complementary. We believe that informal networks are able to compensate for formal networks and vice versa, which will be fruit- ful for developing this field. Temporal solution and networks Temporal solutions provide a seemingly elegant path to the exploration/exploitation dilemma by cycling back and forth between the two notions. The main issue is how exactly organizations can make the switch. Gilsing and Nooteboom (2006) explain that firms will have non-dense exclusive networks char- acterized by formal ties in periods of exploitation and dense open networks with primarily informal and flexible ties in periods of exploration. Using the introduction of biotechnology in Dutch pharmaceu- tical firms to illustrate their model, they explain that firms made the transition by breaking up their exist- ing networks and forming new relationships with outsiders. In other words, they created structural holes and weak ties that provided access to novel knowledge. This is in line with earlier research arguing that networks are not static. Srinivas and Béteille (1964, p. 166) explained that ‘a network even when viewed from the standpoint of a single individual has a dynamic character. New relations are forged, and old ones discarded or modified’. The fluidity of networks depends on the flexibility of structure, including the preparedness of individuals to locally modify structure by changing their inter- action with others. McCarthy et al. (2010) explain that some individuals and teams have a ‘polychronic Figure 3. Systemic solution and networks 14 C. Stadler et al. © 2013 The Authors International Journal of Management Reviews © 2013 British Academy of Management and John Wiley & Sons Ltd.
    • temporal orientation’ – the ability to view time as a heterogeneous and malleable phenomenon. Viewing the environment not simply in a one-dimensional way provides them with an ability to handle the com- plexity of the temporal solution to the exploration/ exploitation dilemma. They are able actively to form new ties, and facilitate appropriate shifts from strong to weak ties and vice versa. Such a shift or sequence of network ties (see Figure 4) can be instrumental in the cycling between exploration and exploitation that organizations might engage. Whether this is indeed the case and how exactly this happens is subject to further research. Another aspect that demands further attention in regard to temporal solutions is the dual role of strong ties. Larson (1992) and Kale et al. (2000) argue that strong ties enhance trust, mutual gain and reciproc- ity, which foster both integration and learning. The emotional intensity and intimacy of strong ties (Granovetter 1973) promotes the exchange of high- quality knowledge and tacit knowledge (Uzzi 1996), but at the same time, strong ties are also likely to lead to stronger alignment and uniformity. Whether this facilitates the transition between exploration and exploitation and vice versa needs to be investigated further. Discussion and conclusion This review of the learning literature has discussed different solutions to the exploration/exploitation dilemma. While there are a number of gaps to be filled, a core issue receiving limited attention in the past is how exactly organizations facilitate the con- nection between exploration and exploitation once they opt for a structural, behavioural, systemic or temporal solution. Although the separation ensures that firms can do both, the integration is far from trivial. The literature points primarily to the role of the top management team. This is an important attribute, though probably not a sufficient mecha- nism to ensure appropriate integration. Paying attention to the network level of analysis will allow us to understand better the link between exploration and exploitation. Previously used by some scholars to explain ambidexterity in networks of alliances (e.g. Hagedoorn and Duysters 2002; Simsek 2009), we have already indicated in the above review that the network lens can be used more widely by apply- ing it to different levels of analysis and to the four solutions of the exploration/exploitation dilemma. Three overarching questions emerge from our attempt to link network theory with the learning literature: 1. Viewing organizations, teams, and individuals as networks, what is their impact on exploration and exploitation? 2. How can networks help organizations to imple- ment solutions to the exploration and exploita- tion dilemma, maintaining both separation and integration? Figure 4. Temporal solution and networks Exploration/Exploitation Dilemma 15 © 2013 The Authors International Journal of Management Reviews © 2013 British Academy of Management and John Wiley & Sons Ltd.
    • 3. Can networks facilitate an effective combination of different solutions to the exploration/ exploitation dilemma? In the following section, we discuss them in some detail. Organizations, teams and individuals as networks The first question outlined above emphasizes the interactive nature of different levels of analysis. Organizational, team and individual level anteced- ents are closely interlinked and cannot be understood fully in separation. For example, the ties between two different firms will depend on contractual arrange- ments (e.g. the type of alliance that is formed), the location of teams that work together in the larger organization, and the personal relations of individu- als from the two firms. While each of these factors remains important, they will also have a joint effect. Assume, for example, that two team leaders in a research group have successfully worked together in a previous job, they are thus more likely to foster frequent meetings, and stronger contractual relation- ships as well. In a similar manner, dense clustering of inter-firm networks provides trust and reciprocity norms, and facilitates intense interaction (Coleman 1988; Uzzi 1996), which is reflected on the team and individual level. It is equally feasible that ties are more effective on some levels of the organization than on others. Bell and Zaheer (2007), for example, find in a study of the impact of geographic distance that organization-level ties fail to transmit know- ledge, while distant individual-level friendship ties enhance knowledge flow. This suggests that weak ties on an individual level are more important for explo- ration than weak ties on the firm level. Future research should pay more attention to the different levels of analysis and, in particular, investigate how weak and strong ties develop, and how this affects the balance between exploration and exploitation. Networks facilitating both separation and integration The second question outlined above draws attention to the different solutions of the exploration/ exploitation dilemma more directly. Structural, behavioural, systemic and temporal solutions propose different strategies to separate the two. This solves some of the inherent tensions, but prior research has been relatively vague about the mecha- nisms that both enable the implementation of these solutions and ensure an appropriate level of integra- tion. Mostly scholars look at the top management team (Gibson and Birkinshaw 2004; Tushman and O’Reilly 1996). As we outlined above, network theory has the potential to advance understanding of this issue substantially. While the role of individuals will be crucial, a more general assumption is that a network’s information flow capacity will be increased within clusters, while the scope of new accessible knowledge is likely to increase through connections across clusters. In other words, a balance between exploration and exploitation can be achieved if networks combine clustering and random linking between them (Schilling and Phelps 2007). The exact role of top managers, organizational set- ups, cultural values, a particular structure or any other variable has not been studied yet. A closer look at dynamics within clusters also looks promising. Fang et al. (2010) suggest that the preservation of diverse ideas within small groups have the potential to increase the exploration capac- ity of the overall network. In other words solutions to the exploration/exploitation dilemma might rest at the team level, and the ties across the network guar- antee dissemination of new information. Finally, it is possible that a contingency approach provides a possible solution from a network theory perspective. Networks with an abundance of struc- tural holes facilitate the generation of new ideas as novel combinations and re-combinations of existing ideas are likely to occur (Burt 1992, 2004). At the same time, such networks have difficulties exploiting the emerging new knowledge. Individuals around structural holes are inherently difficult to coordinate, having different interests, unique perspectives and speaking different languages (Obstfeld 2005). Dense networks, in contrast, do not have a coordination issue as interests and perspectives are realigned, but such networks are less likely to generate novel know- ledge, since they receive little information from outside their network. A way to circumvent subopti- mal concentrations on either exploration or exploita- tion is the combination of networks with different types of ties and structures. Rowley et al. (2000) argue that firms with dense networks do not benefit from weak ties, and firms with sparse networks do not benefit from strong ties. Instead, weak ties are beneficial in dense networks, and strong ties in sparse networks. Future research could apply this idea more specifically in the context of exploration and exploitation. 16 C. Stadler et al. © 2013 The Authors International Journal of Management Reviews © 2013 British Academy of Management and John Wiley & Sons Ltd.
    • More generally, we suggest that future research on the balance of exploration and exploitation should look at individual, team and organizational networks for a better understanding of how the different solu- tions balancing the two notions can be implemented, which mechanisms are available to organizations, and in which way they facilitate an appropriate link, despite the required separation. Most attention should be paid to the nature of ties and the structure of networks. Networks and the combination of solutions The third question outlined above draws attention to a phenomenon that has been ignored in the past: organizations are likely to combine different solu- tions to achieve a balance between exploration and exploitation. As the environment–strategy coalign- ment literature (Andrews 1980) suggests, firms need to co-align their internal structures and processes to fit changes in the external environments (Lawrence and Lorsch 1967). In other words, they constantly need to adapt the levels of exploitation and explora- tion to the environment’s requirements. Even firms using structural or contextual ambidexterity to achieve a simultaneous balance between exploration and exploitation are likely to shift the level of balance over time. Also in line with the idea of combining different approaches, Simsek et al. (2009) refer to reciprocal ambidexterity as an area of future research. Recipro- cal ambidexterity is the ‘sequential pursuit of exploi- tation and exploration across units’ and ‘assumes a reciprocal interdependence in which the outputs of exploitation from unitA become the inputs for explo- ration by unit B and the outputs of unit B cycle back to become the inputs of unit A’ (Simsek et al. 2009, p. 886). In other words both structural and temporal aspects are in play, as separation of exploration and exploitation occurs both through its location in dif- ferent units and a shift between the two notions over time within these units. This is likely to be challeng- ing for managers, who need to engage in constant knowledge exchange, work closely with colleagues in other units and often make decisions together. Taking this link between units into consideration, it is not surprising that scholars have taken a social network approach when studying how firms balance exploration and exploitation across units and time (Lavie and Rosenkopf 2006; Lin et al. 2007; Tiwana 2008). While these studies indicate that this is a solution that firms apply particularly in inter- organizational networks, further research is needed to really understand how it works. In summary, network theory is able to provide a framework that facilitates further research on com- bining different solutions. Important questions will focus on formation and transformation of clusters over time. What is the role of varying network ties? How does network tie-order impact exploration/ exploitation? Is network centrality desirable when firms combine different solutions? Is it feasible to apply different solutions in different parts of the organization, and how can a firm ensure appropriate linkage in that case. A focus on individuals seems particularly sensible, as they maintain ties both within clusters and across clusters of a firm’network. Overall, the contribution of this review is the intro- duction of a promising new level of analysis to the exploration/exploitation literature. Networks help us to understand better how different levels of analysis interact, which mechanisms firms can apply to implement exploration and exploitation, and draws new attention to the need to integrate exploration and exploitation to some extent, even if separation is required. Future research can move along this trajectory, providing a more holistic view of the exploration/exploitation phenomenon. While the focus of this paper is the learning litera- ture, our suggestions can also be of interest to scholars studying social networks. Exploration and exploita- tion have not received much attention in this literature before, but might be of interest as contextual aspects of networks. How does the intention of exploration and exploitation shape networks? Do firms manage networks to foster a balance between the two notions? In conclusion, we also want to add a number of limitations of this review. First, we concentrated on the learning literature. Although other literatures referring to exploration and exploitation might also benefit from a better understanding of networks, we are unable to comment on this. Second, antecedents of exploration/exploitation and outcomes are not dis- cussed in detail, as we wanted to focus on solutions. A detailed discussion on these is, however, available from Lavie et al. (2010). Third, the selection process that we used introduces a historical bias, as most recent contributions are less likely to achieve above mean annual citations. We try to mitigate this by including recent articles that are not part of the core literature, but are seen to make important contribu- tions to this growing field. Finally, as for all review papers, we are not able to test our ideas, but merely develop a path for future research. Exploration/Exploitation Dilemma 17 © 2013 The Authors International Journal of Management Reviews © 2013 British Academy of Management and John Wiley & Sons Ltd.
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