5.3.1 EXPLOITATION VERSUS EXPLORATION
Earlier research has often claimed that organizational practices that simultaneously address efficient
exploitation and effective exploration are impossible to achieve (Hannan & Freeman, 1977; McGill &
Slocum, 1992). Much of contemporary management theory present organizational phenomena in
terms of discrete, contrasting categories, forcing firms to focus on either exploitation or exploration
(Burns & Stalker, 1961; Ghemawat & Costa, 1993). In his 1991 article, March (1991) argues that
exploration and exploration are two fundamentally different learning activities. Whereas exploitation
is associDWHG ZLWK DFWLYLWLHV VXFK DV ³UHILQHPHQW HIILFLHQF\ VHOHFWLRQ DQG LPSOHPHQWDWLRQ ́
H[SORUDWLRQ UHIHUV WR QRWLRQV VXFK DV ³VHDUFK YDULDWLRQ H[SHULPHQWDWLRQ DQG GLVFRYHU\ ́(p.102).
Exploitation and exploration may therefore require fundamentally different organizational structures,
strategies and contexts. Nonetheless, a myopic focus on either exploration or exploitation can have
detrimental consequences for the organization.
5.3.1.1 Exploration
Extensive research has shown that, ³$Q RUJDQL]DWLRQ WKDW HQJDJHV H[FOXsively in exploitation will
suffer from obsolesFHQFH ́(Levinthal & March, 1993, p.105). If investing in new technologies seems
uncertain, firms seem to prefer to stick to already established routines. Asymmetric preference for
exploitation may enhance short-term performance, but at the expense of flexibility (Volberda, 1996).
It can crowd out exploration (Benner & Tushman, 2002) which then leads to competency traps
(Herriott et al., 1985; Levitt & March, 1988) and core competencies become core rigidities instead
(Leonard-Barton, 1992). Corporate icons such as General Motors (GM), International Business
Machines (IBM), Xerox and Digital Equipment Corporation (DEC) have encountered these traps.
7KH\EHFDPHμSULVRQHUV¶RIWKHLUGHHSO\Lngrained routines and seemingly irreversible, fixed assets,
turning their formerly distinctive competencies into obstacles to changing direction. As Lou Gertsner
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5.3.1.2 Exploitation
On the other hand, an exclusive focus on exploration can lead to failure if firms never reap the profits
of their investments (Chesbrough & Rosenbloom, 2002). Focusing solely on exploration can lead
firms to neglect improvement and adaptation of existing routines (March, 1991), and may prevent the
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ability to renew its knowledge base but can trap organizations in an endless cycle of search and
unrewarding change (Volberda & Lewin, 2003). 3M, a company with a superior track record in
emergent exploration for new opportunities, has discovered the limits to overemphasizing a single