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The Handbook of Technology and Innovation Management by Scott Shane

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6.1. Rival Interpretations of Balance

6.1.1. Background

The scientific root of balancing exploration and exploitation lies in evolutionary biology, and is for example documented in Holland's (1975) work on complex adaptive systems. Models of adaptive systems reveal that they suffer from engaging in too much of one activity to the exclusion of the other. Exploration without exploitation results in experimentation costs without the benefits. Exploitation without exploration results in suboptimal stable equilibria. Viewing organizations as complex adaptive systems, March (1991) imports these concepts into the organizations field and argues that organizations have a similar detrimental tendency to lean towards either extreme. The subsequent proliferation of studies that have drawn upon these themes continues to support their relevance, while stressing the importance of balance, in particular for innovation (e.g., Katila and Ahuja, 2002; He and Wong, 2004; Laursen and Salter, 2006).

However, finding the appropriate balance is often difficult for firms to achieve, let alone maintain. Studies have shown that firms more often tend to lean toward too much exploitation (Benner and Tushman, 2003; Rosenkopf and Almeida, 2003), and more infrequently toward too much exploration (Miller and Friesen, 1980; Nohria and Gulati, 1996). (See also incumbent technology firms such as Dell and IBM as examples of over-exploiters, and Amazon and Apple as examples of over-explorers, frequenting the business ...

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