Perspective #1: The performance linkage
To date, the linkage between organizational ambidexterity and performance has provided inconsistent findings. March (1991) first mentioned
that engaging in either exploitation or exploration would create ‘competency traps’ and argued that they should be jointly pursued. Combining
exploitation and exploration improves performance by allowing organizations to be innovative, flexible, and effective while remaining stable
and efficient. Based on March’s ambidexterity-performance assertion,
several studies have analyzed the performance outcomes of ambidexterity, arriving at rather equivocal results. These findings have provided
evidence of a direct (e.g., Lubatkin et al., 2006), a contingent (e.g., Lin,
Yang, & Demirkan, 2007), and a non-existent (e.g., Venkatraman et
al., 2007) relationship between ambidexterity and performance. Hence,
evidence of the linkages between organizational ambidexterity and
performance remains weak.
Recently, an increasing number of scholars (Raisch & Birkinshaw,
2008; Raisch et al., 2009; Simsek, 2009) have highlighted the need for
a further analysis of the conditions under which ambidexterity leads to
success. Instead of relying on single performance indicators that may
bias the ambidexterity-performance relationship, these authors claim
for multiple performance dimensions, including environmental moderators (i.e. the industry context, environmental dynamism) and various
firm performance indicators of effectiveness (i.e. sales growth, market
share, profit) and efficiency (i.e. return on investment, return on sales,
return on assets).
In answering this call, we consider the analysis of the ambidexterity-performance relationship under economic crisis situations a fruitful
avenue for future research for various reasons. First, the environmental context is an essential element in understanding ambidexterity’s
performance effect (Simsek, 2009). Economic crisis situations create
similar environmental conditions for organizations active in the same
industry and may highlight specific organizational attributes responsible for successful organizational ambidexterity. While Samsung
Electronics managed to successfully navigate the Asian crisis, other
companies within the same industry went bankrupt or only yielded mediocre performance results (e.g., Daewoo Electronics, LG Electronics).
This facilitates the comparison between a distinct crisis behavior and
Second, an economic crisis often functions as a Lewinian ‘unfreezing’
process that leads to organizational activity through either reinforcement and/or alteration of the status quo. The presence of a triggering
event enables us to attribute certain activities before and after the crisis. At SEC, Yun reinforced the traditional chip business, while simultaneously investing heavily in distinct emerging business areas. These
actions allow us to identify and analyze the selection, implementation,
and effectiveness of explorative and/or exploitative activities more precisely.
Finally, economic crises provide additional measures of success, such
as firm survival, the overall impact of the crises on organizations, and
the decrease in organizational slack, employee turnover, and corporate reputation. Besides SEC’s financial performance improvement since
the outbreak of the crisis in 1997, the company also achieved market
leadership in most of its business activities, transformed its corporate
reputation and image dramatically towards a qualitative, high-end producer in the digital media business, and constantly improved its number of commercialized R&D projects.
Perspective #2: Resource availability
Research has argued that environmental munificence positively supports multiple organizational growth opportunities (Dess & Beard,
1984). The ease with which organizations can access financial and
human resources in munificent environments provides them with the
resources for exploration and exploitation (Pfeffer & Salancik, 1978).
Unfortunately, only a few studies have addressed the question of how
environmental munificence impacts the pursuit of ambidexterity. For
instance, Cao, Gedajlovic, and Zhang (2009) empirically indicate that
scarce environmental contexts increase the trade-off between exploitation and exploration. Similarly, Jansen, van den Bosch, and Volberda
(2005) indicate an increased necessity for ambidexterity under situations of high environmental dynamism and competitiveness. We believe that addressing the question of how external resource constraints
generally impact the pursuit of exploration and exploitation will help uncover critical elements for managerial attention.
Similarly, the inherent condition of increasing levels of organizational
scarcity during economic crises provides promising insights for the ambidexterity debate. Scholars have started applying organizational slack
as a moderator of exploration and exploitation. Jansen, van den Bosch,
and Volberda’s (2006) empirical findings indicate that the simultaneous
pursuit of exploration and exploitation negatively impacts the overall level of organizational slack. Similarly, Lubatkin, Simsek, Ling, and Veiga
(2006) argue that small firms with fewer organizational resources may
not be able to manage the contradictory knowledge processes required
to attain ambidexterity. Likewise, Ebben and Johnson (2005) provide
empirical evidence that small firms benefit more from a focusing strategy than from a mixed one.
Nevertheless, there is no empirical evidence that organizational ambidexterity is contingent upon the availability of sufficient resources. In
fact, organizations are not equally affected by an economic crisis. Some
organizations may suffer more from financial hardship, while others
may overcome the economic conditions relatively easily. Samsung’s
ability to excel in both exploration and exploitation may be attributed
to its capability to generate sufficient slack during the implementation
of the crisis response. Yun’s efforts to make SEC’s semiconductor business more efficient and to establish a collaboration with Intel Corp.
simultaneously allowed him to finance the required investments in the
emerging business areas. More importantly, however, such a procedure
raised the question if firms’ exploitative units need a certain strength to
support the costs of the exploratory units. Analyzing the organizational
conditions (i.e. the organizational resources, firm size, firm scope, market share, international context, etc.) during economic crises may better
isolate these factors and allow researchers to reveal how organizations
reconcile exploration and exploitation’s conflicting demands.
Perspective #3: Structural dimension
Initially, the ‘organizational ambidexterity’ concept was conceptualized
as sequential patterns of organic and mechanistic structures (Duncan,
1976). Basically, firms manage to initiate innovations through organic
structures, which are followed by mechanistic structures to exploit them.
This view of temporal sequencing is evident in some of the current research on organizational change and adaptation (e.g., Venkatraman et
al., 2007). While the temporal sequencing of exploration and exploitation is based on a rate of change that permits organizations to choose
their alignments sequentially, we consider this approach inadequate
under situations of swift, uncertain environmental change. Like the
Samsung Electronics case highlights, firms are often required to simultaneously deal with performance problems and environmental change.
Failure to respond and adapt to both environmental demands within an
adequate period could mean missing strategic windows, opportunities,
and falling behind competition. Consequently, an environmental crisis
requires organizational architectures to allow the simultaneous pursuit
of exploitation and exploration.
Based upon the ideas of contingency theorists, these complex organizational forms reflect the firm’s environmental uncertainty through their
multiple integrated and mutually inconsistent architectures (O’Reilly &
Tushman, 2004). Instead of switching between designs for exploration and exploitation, ambidextrous organizations simultaneously host
exploitative and explorative subunits. They thus consist of multiple
contradictory structures, processes, and cultures within the same firm.
Owing to the limited structural linkages, organizations are capable of
simultaneously maintaining different competences with which to address inconsistent demands arising from environmental turbulence.
Generally, the literature identifies structural separation and contextual
solutions as two fundamental design options (e.g., Raisch, 2008). Under structural separation, organizations are divided into distinct organizational units that pursue either exploration or exploitation. Aiming
to achieve exploratory or exploitative goals, each unit contains its own
structure, culture, and employees. Conversely, contextual solutions
benefit from supplemental network structures that complement a dominant organizational design. This design enables employees to switch
between routine tasks in the primary structures and innovative tasks in
network structures. Competing demands for exploitation and exploration coexist within a single business unit.
Contextual solutions depend on a certain degree of organizational flexibility, allowing employees to divide their time between efficient operations and innovative activities. To be successful, this solution requires
formally established routines, supportive organizational contexts, as
well as a certain organizational culture (Birkinshaw & Gibson, 2004;
Raisch, 2008). However, environmental crisis conditions may fundamentally alter these requirements. The decreasing level of organizational slack due to the economic crisis leads to an intensification of
conflicts on the organizational level, as mutually exclusive resource
requirements predominate (Cameron et al., 1987). This increase in
resource scarcity strengthens and amplifies the trade-off between exploration and exploitation (Gupta, Smith, & Shalley, 2006). As seen in
our example, the organizational performance decline (i.e. the drop in
sales) urged Samsung Electronics to produce short-term visible results
by means of downsizing and retrenchment. This crisis response entailed greater standardization, tight controls, and routinization. However, Samsung also managed to ensure that both exploitation strategies
and their organizational effects did not negatively impact the organization’s overall exploration strategy in some of the other business
units. In this respect, the absence of a clear separation between the
two orientations could destroy an organization’s explorative capability.
Consequently, we believe that conditions of economic crisis and turbulence decrease the likelihood of performance improvement through
Based on Samsung Electronics’ example, we argue that, generally,
structural separation has a positive impact on the pursuit of exploitation and exploration during economic crises. An organizational design
consisting of fundamentally different subunits enables each unit to be
aligned and adapted to specific environmental demands. To protect
the benefits of historically rooted learning, as well as to escape from
this learning regime, structural separation creates multiple internally
inconsistent organizational architectures simultaneously (O’Reilly &
Tushman, 2004). Separation allows cross-fertilization between units
and prevents cross-contamination, as explorative units are protected
from exploitative units’ routines and established processes (O’Reilly &
Tushman, 2004). In comparison to semi-structures that are both loose
and tightly designed, such architectural design enables organizations
to set clear objectives for exploitation and exploration. Under economic
crisis conditions, separation evades the impending threat of having to
sacrifice efficiency for innovative activities and vice versa.
Perspective #4: Senior team capabilities
Combining exploration and exploitation within an organization creates
considerable challenges for senior teams (Denison & Mishra, 1995).
Leading ambidextrous organizations demand that both the ability to
seek integration across contradictory tensions and the ability to engage
in multiple leadership behaviors that may appear conflicting should be
achieved (Smith, Binns, & Tushman, 2010). For instance, senior teams
need to facilitate organizational activities and ensure strategic coherence, yet allow for variety and local adaptation (O’Reilly & Tushman,
2004). Following the example of Samsung Electronics’ CEO Yun, leaders need to find the right balance between rigorous cost cutting and
creating an entrepreneurial context that allows sustainable growth.
Although scholars have emphasized that senior executives are decisive in mitigating the implicit tensions between exploration and exploitation (Gibson & Birkinshaw, 2004; Smith & Tushman, 2005), there is
little empirical evidence for this assertion (Jansen, George, van den
Bosch, & Volberda, 2008). While Smith and Tushman (2005) established a conceptual framework, only a few studies have empirically
investigated senior executives’ contributions to ambidexterity. In this
respect, economic crises are occasions for managers to demonstrate
competence (Kiesler & Sproull, 1982). Prior research has argued that
leaders’ behavior contributes strongly to organizational performance
under changing environmental conditions (e.g., Wu, Levitas, & Priem,
2005). Moreover, Jansen, Vera, and Crossan (2009) provide empirical
support for the suggestion that environmental dynamism functions as
an important moderator when analyzing leadership behavior and organizational ambidexterity. In a similar vein, we consider the following
aspects as potential outcomes of leadership behavior under situations
of economic crisis.
First, coordination at the managerial level becomes more important
during an economic crisis, as it provides emerging exploratory businesses with the necessary resources from exploitative units. In the
Samsung Electronics case, senior managers were able to balance
their managerial attention adequately in order to remain flexible and
efficient regarding any potential changes within the environment during
the economic crisis. If senior managers do not consider exploratory
units as important as subunits for exploitation, these units will become
subordinate to a focus on exploitation, and vice versa. Consequently,
senior management has to create the supportive political, social, and
financial context in which both orientations can coexist (O’Reilly & Tushman, 2004). This creates the opportunity to create new business models and overcome competency traps.
Second, the role of a clear and compelling vision for ambidexterity became evident in our case example (O’Reilly & Tushman, 2008). Samsung Electronics’ vision was an enabler that gave Yun’s organizational
activities meaning and reduced confusion, motivated employees, and
assured stakeholders of the senior managers’ confidence that they
could effectively manage the crisis conditions and that they were competent to do so. Leaving stakeholders in doubt about the company’s
long-term direction leads to rumors, passivity, or a wait-and-see attitude, none of which generate stakeholder commitment. Studying how
senior teams communicate their ‘vision out of the crisis’ may unfold
how effective explorative and exploitative goals can be aligned under
one common objective.
Third, studying economic crisis situations may spur interesting insights
into distinct leadership styles for ambidexterity. While exploitation requires the status quo to be maintained by setting goals, clearly communicating expectations, and how efforts will be rewarded, exploration
needs a leadership style characterized by the ability to inspire others,
by allowing them to challenge existing assumptions, generate employee commitments, motivate risk-taking, and by directing individuals
to new objectives and assumptions. Some scholars (e.g., Jansen et al.,
2009) refer to Bass’s (1998) framework, labeling the above-mentioned
leadership behavior as a ‘transformational leadership’ style for exploration and ‘transactional leadership’ style for exploitation. However, how
senior leaders attain these requirements remains unanswered. Economic crisis conditions create organizational contexts characterized
by stress, anxiety, and risk (Waldman, Ramirez, House, & Puranam,
2001). Given the speed and complexity with which changes may occur, senior leaders must be able to balance the contradicting tensions
between exploitation and exploration more rigorously – they need to
become consistently inconsistent (Benner & Tushman, 2003). In this
regard, Smith and Tushman (2005) consider the ability to engage in
paradoxical thinking vital for effectively managing exploration and exploitation.
Finally, alterations in the senior team’s composition are often considered during economic crises and under situations of organizational
decline (Barker, Patterson & Mueller, 2001). At Samsung Electronics,
Yun broke with the established cultural and managerial traditions and
brought outsiders into the senior team. Scholars have previously mentioned that the senior team’s composition influences the organizational
ability to deal with environmental conditions profoundly (e.g., Tushman
& Rosenkopf, 1996). While the existing team members become experts
at maintaining and exploiting the status quo (Virany et al., 1992), new
team members bring in new competencies, perspectives, and heterogeneity of experiences, which form the basis of experimentation (Grinyer & McKiernan, 1990). Accordingly, the senior team’s competences,
capabilities, and internal processes mediate between exploration and
exploitation during economic crises and form the connection between
stability and change (Tushman & Rosenkopf, 1996). In this respect,
strategy scholars (e.g., Adner & Helfat, 2003) have particularly emphasized senior teams’ three distinct skills and abilities that help prevent
organizational failure, namely a balance between human capital (i.e.
the right mix of general, industry-specific, and firm-specific skills) (Castanias & Helfat, 2001), social capital (i.e. managerial ties inside and
outside the firm) (Volberda & Baden-Fuller, 1998), and managerial cognition (i.e. beliefs and mental models for decision making) (Walsh,
1995). Consequently, the leadership challenge during an economic crisis relates to the question of how individuals adequately complement
their ambidexterity-managing skills.
In sum, the resolution of role conflicts between exploitation and exploration (e.g., O’Reilly & Tushman, 2004) becomes a crucial element
under economic crisis situations. By studying senior teams (i.e. team-composition, leadership-style, decision-making, information-processing
capabilities, and inter-organizational power distribution) under severe
environmental conditions, we gain insights into the specific senior team
characteristics that are necessary to achieve ambidexterity (Simsek,
Veiga, Lubatkin, & Dino, 2005). These potential insights may uncover
and resolve some of the contradictory arguments related to how to
create synergetic value across exploitative and exploratory units.