In this paper, exploration and exploitation are conceptualized in terms of a nonlocal-local search continuum in three-dimensional supply, demand, and geographic space. Using cross-sectional data from a wide range of manufacturing industries, we develop and validate an operational measure of the exploration-exploitation concept. In line with theory-based arguments, our analysis suggests that the value of supply-side, demand-side, and spatial exploration and exploitation is contingent on the environment. While boundary-spanning supply-side search is found to be positively associated with innovation in more-dynamic environments typical of the entrepreneurial regime phase of technology evolution, such exploration appears to hurt innovation in less-dynamic environments. In a reverse fashion, while boundary-spanning demand-side search is found to be favorably associated with innovation in less-dynamic environments, it appears to harm innovation in a more-dynamic context. Interestingly, spatial boundary-spanning search seems to contribute to innovation in more- as well as less-dynamic environments. With the caveat that the substantive findings of this study are based on cross-sectional data, we discuss the implications of our work and future research directions.

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Keywords entrepreneurship, exploitation, organization, organizational effectiveness, organizational structure, technological innovations, technology transfer
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Series ERIM Top-Core Articles
Journal Organization Science
Sidhu, J.S, Commandeur, H.R, & Volberda, H.W. (2007). The multifaced nature of exploration and exploitation: Value of supply, demand, and spatial search for innovation. Organization Science, 18(1), 20–38. doi:10.1287/orsc.1060.0212