Heuristics for strategic ambidexterity: balancing exploration and exploitation over time in varying environments

Abstract

Drawing on studies of strategic dynamics and organizational change, this thesis proposes four approaches to balancing exploration and exploitation over time: Specialist, Cyclical, Irregular, and Regular. Various approaches to ambidexterity may be more effective under different environment conditions, and performance may vary along with: 1) varying types of rule change environments, 2) varying levels of competitive intensity among firms, 3) reactive versus proactive timing heuristics, and 4) varying levels of product diversification. Several hypotheses are developed and confirmed using qualitative field research and agent-based modeling. Results indicated that strategic leaders should balance their exploration and exploitation with Regular ambidexterity as their environments become dominated by competence enhancing innovation. Conversely, firms should temporally shift their balance of exploration and exploitation when competence-destroying changes dominate. In a balanced environment, Irregular ambidexterity performs best. These finding are especially relevant in highly competitive contexts. Also, proactive switching increases performance more than reactive switching, whereas diversification reduces the performance of sequential heuristics.