Balancing Exploration and Exploitation Through Structural Design: The Isolation of Subgroups and Organizational Learning

Christina Fang (), Jeho Lee () and Melissa A. Schilling ()
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Christina Fang: Stern School of Business, New York University, New York, New York 10012
Jeho Lee: KAIST Business School, Korea Advanced Institute of Science and Technology, Dongdaemun-gu, Seoul 190-102, Korea
Melissa A. Schilling: Stern School of Business, New York University, New York, New York 10012

Organization Science, 2010, vol. 21, issue 3, 625-642

Abstract: The classic trade-off between exploration and exploitation in organizational learning has attracted vigorous attention by researchers over the last two decades. Despite this attention, however, the question of how firms can better maintain the balance of exploration and exploitation remains unresolved. Drawing on a wide range of research on population and organization structure, we argue that an organization divided into semi-isolated subgroups may help strike this balance. We simulate such an organization, systematically varying the interaction pattern between individuals to explore how the degree of subgroup isolation and intergroup connectivity influences organizational learning. We also test this model with a range of contingency variables highlighted in the management research. We find that moderate levels of cross-group linking lead to the highest equilibrium performance by enabling superior ideas to diffuse across groups without reducing organizational diversity too quickly. This finding is remarkably resilient to a wide range of variance in factors such as problem complexity, environmental dynamism, and personnel turnover.

Keywords: interpersonal networks; exploration and exploitation; organizational learning; diffusion (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (94)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ororsc:v:21:y:2010:i:3:p:625-642

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