Location is everything: Explorative and exploitative learning, non-scale free resources, and firm performance of German companies

Eva Dötschel (), Sebastian Junge () and Tobias Guthmann ()
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Eva Dötschel: Friedrich-Alexander-Universität
Sebastian Junge: Friedrich-Alexander-Universität
Tobias Guthmann: Friedrich-Alexander-Universität

Journal of Business Economics, 2024, vol. 94, issue 2, No 3, 279-309

Abstract: Abstract A firm’s aptitude to acquire new knowledge and simultaneously exploit existing capabilities is suggested to improve firm performance. Although resource endowment is important to achieve a balance between exploration and exploitation, the role of a firm’s non-scale free resources on the exploration‒exploitation and performance linkage has gained little attention. We transfer and apply the first longitudinal test of the exploration–exploitation and firm performance linkage in a German sample. We argue and replicate an inverted U-shaped relationship between relative exploration and firm performance. Further, we hypothesize the competition for and the access to non-scale free resources to moderate this relationship. While we do not find support for the latter, we reveal that the competition for non-scale free resources weakens the relationship between relative exploration and firm performance. We contribute to the exploration–exploitation literature by testing the proposed relationship between exploration–exploitation and firm performance in a different geographical setting, advancing the generalizability of this relationship. In order to do so, we make the commonly accepted measurement approach of Uotila et al. (Strateg Manag J 30:221–231. 10.1002/smj.738, 2009) applicable to German-speaking countries by translating, refining, and extending the dictionary proposed by March (1991) with more contemporary words. Moreover, we contribute by investigating the competition for non-scale free resources between companies in the context of exploration–exploitation. We thereby reveal lower competition for non-scale free resources as a success factor for improving the relationship between a firm’s relative exploration orientation and its performance. This seems particularly important since Germany’s economy has been confronted with a decline in its innovative strength and an eminent lack of skilled workforce in recent years.

Keywords: Exploration–exploitation; Firm performance; Non-scale free resources; Geographical context (search for similar items in EconPapers)
JEL-codes: L26 M10 M54 O32 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11573-023-01163-7

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