Date of Award
PhD in Business
Department of Information and Process Management
Robert D. Galliers
Michael A. Hitt
he ability to innovate is considered central to firm performance and the consensus is that firms should balance exploration and exploitation innovation to succeed. Studies using an exploration/exploitation perspective have gained increasing interest, and have generally concluded that exploration innovation rates are too low. Researchers have concentrated on the early aspects of the innovation planning process: the Search, Portfolio Selection, and Design Phase, and have also studied the benefits of pursuing a serial or parallel pursuit of exploration and exploitation. Largely missing from exploration/exploitation innovation literature, however, is the development phase—which is among the longest and resource intensive phases of innovation.
This dissertation studies the exploration innovation that firms are able to finish—complete through development. As such it concentrates on development and how the initial exploration exploitation plan is accomplished. It focuses specifically on the changes to the planned balance of exploration/exploitation that occur after the plan enters the Development (R&D) phase.
The research comes to five overall conclusions. First, regardless of the plan for balance in exploration/exploitation that is determined during the Search, Portfolio Selection, and Design phases, exploration innovation declines from plan materially in the Development phase. Second, management regularly make decisions to add new unplanned projects to the Development schedule, which alter the original Development plan. Third, explorative innovation is disproportionately "crowded out". Development manpower is systematically removed from exploration innovation during the development phase and is diverted to exploitation projects. The result is a lower rate of exploration innovation and increased exploitation. Fourth, the findings run counter to conventional scholarship that places Resource Based View tenets (skills and capabilities) and project team dynamics in the forefront of explaining development and innovation results. Instead, firm-wide Agency forces (opportunism) as well as Resource Dependencies were found to account for a majority of the decline in exploration innovation. Finally, these dynamics were found to originate from outside the extended project and development team.
This dissertation begins as a qualitative theory building investigation, using interviews at multiple software firms to expose and gain an understanding of innovation patterns and constructs. The resulting interview data are used to build hypotheses around two theoretical models (Agency Theory and Resource Dependence Theory) to explain the same DV of exploration innovation performance. Next, the theory-based IV's of each model are operationalized based on tenets arising from the extant literature. The hypotheses are subsequently tested via a population study using a mail questionnaire sent to all U.S.-based commercial software SME's. Statistical analysis follows, including regression, providing support for the hypotheses and the models of Agency Opportunism and Resource Dependence. Limitations and new research directions are identified.
Randall, Craig, "An Unstable Balance: Exploration, Exploitation, and Innovation Decline during Development". 2012. 5.