Trade-off or complement? Choices along ambidextrous paths from resource allocation through performance

Authors: Fen-May Liou

Journal: Corporate Management Review. Dec. 2018, 38(2): 1-22.

Keywords: Ambidexterity; exploitation; exploration; strategic choice.

Abstract:
To adapt to the changing business environment, an incumbent manager must start by determining business objectives, based on which limited resources are allocated, and then follow up with actions that not only build but also serve to accumulate an effective and flexible capacity for ambidexterity, such that the firm's targets for short-term performance and long-term value can be reached. Drawing on data from the computer-based services industry in North America, this empirical study provides support for a causal pathway from resource deployment through exploration/exploitation configuration to performance. It also shows the coexistence of trade-offs and complementary mediating effects of exploration and exploitation between resource allocation and short- and long-term performance. To minimize the cost of trade-off effects between exploitation and exploration and, at the same time, maximize the benefits of complementary effects, ambidextrous strategic management involves an iterative process of dynamic capability which, with reconfiguration of exploration and exploitation as the central focal point, calls for the making and re-making of strategic choices between short-term and long-term goals and a complementary reallocation of resources.