Exploration, exploitation, and financial performance: analysis of S&P 500 corporations

Abstract

The literature suggests that established firms need to balance their exploration and exploitation activities in order to achieve superior performance. Yet, previous empirical research has modeled this balance as the interaction of orthogonal activities. In this study, we show that there is a trade-off between exploration and exploitation and that the optimal balance between exploration and exploitation depends upon environmental conditions. Using a novel methodology to measure the relative exploration versus exploitation orientation, Show more