This study explores organizational and competitive factors affecting exploration/exploitation activities in SMEs by examining the role of entrepreneurial orientation (EO), market orientation (MO) and perceived competitive intensity. We test the relationships among these variables using data collected from 55 manufacturing SMEs operating in the southern part of U. S. The findings provide a strong support for a positive association between EO, MO and exploration/exploitation activities. Perceived competitive intensity was only a significant moderator for the relationship between MO and the degree of exploratory activities. Our findings, hence, suggest the significant role organizational predictors play in enhancing exploration/exploitation activities in SMEs. Implications for research and practice are discussed.
Despite the substantial amount of empirical work on organizational ambidexterity among large, established business organizations, our understanding of the interplay, influence and implications of exploratory and exploitative activities in small and medium-sized enterprises (SMEs) is still limited. Research on organizational ambidexterity has only recently begun to focus more on SMEs as an important empirical context (e.g. Cegarra-Navarro and Dewhurst, 2007, Jones and Macpherson, 2006 and Lubatkin et al., 2006). The exploratory and exploitative activities in SMEs and larger corporations differ for at least three different reasons. First, SMEs, unlike larger and well-established corporations, lack the necessary slack resources needed for actively realizing the benefits of organizational learning (Cegarra-Navarro & Dewhurst, 2007). Second, senior managers in SMEs (including owner–managers) have extensive involvement in strategic and tactical decisions compared to larger organizations with more complex bureaucracies (Lubatkin et al., 2006). Finally, organizational learning processes in SMEs could be different as there is a lack of formal and institutionalized routines as well as a mechanism for acquisition and dissemination of new knowledge (Jones & Macpherson, 2006). Collectively the issues of slack resources, senior management involvement, hierarchy and organizational routines impact SMEs' exploration and exploitation activities.
The purpose of this study is to extend the on-going research on organizational ambidexterity by examining the link among market orientation (MO), entrepreneurial orientation (EO), perceived competitive intensity and the degree of exploration/exploitation activities in SMEs. Market orientation and entrepreneurial orientation are important organizational-level constructs that have been extensively shown to affect both the firm's strategic direction and performance (Ellis, 2006 and Moreno and Casillas, 2008). Past studies have also shown that there is a strong combined complimentary effect of EO and MO on SME performance (Li, Zhao, Tan, & Liu, 2008).
Consistent with the established argument in the extant literature, we contend that individual exploration and exploitation activities are the origins of firm exploration and exploitation (Mom, Van Den Bosch, & Volberda, 2007) and that exploration and exploitation activities are the outcomes of managerial information processing (Lubatkin et al., 2006, Mom et al., 2007 and Smith and Tushman, 2005). It is especially true in SMEs context, because unlike their counterparts in larger organizations, senior managers of SMEs are closer to the day-to-day operations of their firms (Jones & Macpherson, 2006). Accordingly, we make the assumption that firm exploration and exploitation is a reflection of individual senior manager's information processing as well as exploration and exploitation activities (Lubatkin et al., 2006). This assumption is consistent with previous studies on this issue (e.g. Cegarra-Navarro and Dewhurst, 2007 and Wyer et al., 2000).
This study examines important organizational and competitive factors affecting the degree of exploratory and exploitative activities among SMEs. Specifically, we empirically test the relationship among market orientation (MO), entrepreneurial orientation (EO), managers' perceived competitive intensity and the degree of exploration/exploitation activities in SMEs. The findings of the study provide a strong support for a positive association between EO, MO and exploration/exploitation activities. Perceived competitive intensity is only a significant moderator for the relationship between MO and the degree of exploratory activities. Our findings, hence, suggest the significant role organizational predictors play in enhancing exploration/exploitation activities in SMEs. It also suggests that managers' perception of their task environment plays an important role in facilitating organizational learning activities in SMEs.
