Exploration and Exploitation Innovations in the Food Firms

Abstract

In a context of increasingly intense competition, creating a unique mix of value through innovation has been considered one tenet for creating a competitive advantage (Porter, 1996). During the past decades, innovation has become a central issue of strategic management (Nag et al., 2007).
The literature has identified several problems in relation to firm failure innovation decisions, focusing on the supply-side (organizational competence, Henderson 2006; dependence of actual most profitable customers, Christensen, 1997; out-of-date competence due to technological breakthroughs, Tushman & Anderson, 1986), and on the demand-side (market turbulence, Abernathy & Clark 1985; institutional environment, Chesbrough, 2001).
Based on March’s (1991) continuum perspective of exploitation-exploration2, we analyze the effects of knowledge-based innovation strategy on performance, testing the ambidexterity effect and extreme positions. Though both are necessary for survival and evolution (Levinthal & March, 1993; March, 1991), mindsets and organizational routines needed for each one are different. Tensions arise when firms make a simultaneous pursuit of both, being even impossible (March, 1996). Researchers have contributed from various literature streams to the discussion on balancing exploration and exploitation (Raisch & Birkinshaw, 2008; Lavie et al., 2010). The fact that there are tensions among both has led to a relevant research paradigm (Gupta et al., 2006; Raisch et al., 2009). This ambidexterity effect has attracted several researchers examining the tensions between exploitation and exploration.
This study analyses how food manufacturers balance their innovation strategies. In particular, we analyze the effects of exploration and exploitation strategies and the type of innovation on performance. Since markets demand new and differentiated products, with high safety and quality standards (Grunert, 2005), innovation is a dominant strategy in this industry (Hauknes, 2001). Since supply chain management is critical, relationship-based innovation between distributors and suppliers has therefore been recognised as a major supply chain trend (Ganesan et al., 2009).