Journal of Management Studies 46:4 June 2009 doi: 10.1111/j.1467-6486.2009.00828.x Organizational Ambidexterity: Towards a Multilevel Understanding Zeki Simsek University of Connecticut abstract Although interest in the concept of organizational ambidexterity has increased during recent years, this line of inquiry remains unfocused and limited due to a lack of more encompassing conceptual efforts. As a first step, we begin by critically reviewing previous research on the conceptualization, antecedents, and consequences of ambidexterity. We then offer a model that specifies a more encompassing, multilevel explanation of ambidexterity. Finally, we trace research and managerial implications and suggest some potential research avenues. INTRODUCTION Increasingly, organizational researchers are using ambidexterity, the ability of humans to use both hands with equal skill, as a metaphor for organizations that are equally dexterous at exploiting and exploring. An ambidextrous organization maintains a high degree of balance between exploitation (learning via local search, experiential refinement, and reuse of existing knowledge) and exploration (learning gained through processes of concerted variation, planned experimentation, and play) (Baum et al., 2000a; Levinthal and March, 1993; March, 1991). Researchers have used ambidexterity to analyse numerous significant organizational phenomena. Its importance has been noted across the fields of strategic management ( Jansen et al., 2008; Lubatkin et al., 2006; Smith and Tushman, 2005), innovation and technology management (Ambos et al., 2008; He and Wong, 2004; Markman et al., 2008; Tushman and O’Reilly, 1996), organizational learning and adaptation (Levinthal and March, 1993), organization theory (Adler et al., 1999; Benner and Tushman, 2003), and organizational behaviour (Gibson and Birkinshaw, 2004). Additionally, the managerial importance of ambidexterity is evident in the many prescriptions offered for organizational performance improvement, adaptation, and survival. Address for reprints: Zeki Simsek, University of Connecticut, School of Business, Management Department, 2100 Hillside Road, Unit 1041, Storrs, CT 06269-1041, USA (Zeki.Simsek@Business.uconn.edu). © Blackwell Publishing Ltd 2009. Published by Blackwell Publishing, 9600 Garsington Road, Oxford, OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA. Z. Simsek Curiously, however, organizational ambidexterity (OA) remains an undertheorized, underconceptualized, and, therefore, poorly understood phenomenon. Perhaps Gupta et al. (2006, p. 697) put it best when they noted that, ‘although near consensus exists on the need for balance [of exploitation and exploration], there is considerably less clarity on how this balance can be achieved’. Importantly, research to date has typically employed only one variable to explain OA, such as dual structures (Benner and Tushman, 2003), behavioural context (Gibson and Birkinshaw, 2004), or top management team (TMT) behavioural integration (Lubatkin et al., 2006). Lacking integrative models spanning multiple levels of analysis (Gupta et al., 2006; Jansen et al., 2005), previous studies thus far ‘have not generated an overarching theory’ (Adler et al., 1999) to explain OA. Additionally, comparison, aggregation, and replication of findings have been difficult because of diverse conceptualizations. Together, these issues highlight the need for taking stock of the current body of knowledge, further specifying the OA construct, and an encompassing model of OA. As a first step, we review extant research and suggest that differentiating the various input–process–output elements[1] associated with this line of inquiry can help invigorate the OA concept by both substantiating and extending its conceptual foundations. Then, we advance a multilevel explanatory model that concurrently extends and synthesizes research by specifying the dominant relationships between constructs at the organizational, interfirm, and environmental levels of analysis. By specifying these interactive influences among these levels, we demonstrate that a thorough examination of such influences may be critical in gaining a more complete understanding of where OA comes from and how it matters to performance. In so doing, we respond to the call for more integrative and multilevel analyses on OA (e.g. Gupta et al., 2006; Jansen et al., 2005; Raisch and Birkinshaw, 2008). In particular, our theory addressees two neglected issues that Raisch and Birkinshaw (2008) observe in a comprehensive review of this line of research: (a) the interrelationships between different antecedents and (b) the complexity of the ambidexterity–performance relationship. Finally, completing the conceptual development of our paper, we discuss promising avenues for future inquiries on multilevel examinations of OA. ORGANIZATIONAL AMBIDEXTERITY: AN INPUT–PROCESS–OUTPUT VIEW In this section, we provide an overview of the OA literature and the core concepts we use to structure our review. The core construct of this literature is OA but research on OA also includes studies of its antecedents, as well as its consequences. Nevertheless, as with many areas of organizational research, these studies exhibit some variation with regard to the labelling, definition, and measurement of the core concepts. One fruitful way to examine these differences is to adopt an input–process–output framework (Figure 1), which helps to distinguish among OA components or processes (e.g. exploration and exploitation), outcomes or outputs (e.g. firm performance, survival, growth, etc); and antecedents or inputs (e.g. firm-level, environment-level, interfirm-level, etc). By using each element to provide a review of previous work (below), we also set the stage for our multilevel model. © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License 598 Input Antecedents of organizational ambidexterity (e.g. organization-, interfirm-, and environment-level) Process Components of organizational ambidexterity (e.g. exploitation and exploration) 599 Output Consequences of organizational ambidexterity (e.g. financial performance) Figure 1. An input–process–output view of organizational ambidexterity Components of Organizational Ambidexterity The word ‘ambidexterity’ is derived from the Latin ambos, ‘both’, and dexter, ‘right’ (as opposed to left). Thus, ambidexterity is ‘right on both sides’. Since Duncan (1976), perhaps the first researcher to coin the term ‘ambidextrous organization’, the concept has been used to describe a variety of distinctions in organization behaviour and outcomes. In fact, as Gibson and Birkinshaw (2004) note, it has increasingly been used to refer to an organization’s ability to do two different things at the same time – for example, exploitation and exploration, efficiency and flexibility, or alignment and adaptability. Using several dimensions, we summarize these previous definitions in Table I.[2] While it is clear from Table I that researchers have diversely defined OA, it is possible to classify these previous definitions into three: structural, behavioural, and realized. Each entails somewhat different levels of analysis. Behavioural ambidexterity proposes that a single business unit may be a meaningful level at which to examine OA, while structural views hold only for higher levels of organizational abstraction. As we discuss below, the realized view, which we label as such because of its focus on the organization’s exploitation and exploration attainments, is applicable to a single business unit, as well as to higher levels of organizational abstractions (such as diversified organizations). Importantly, whereas structural and behavioural approaches emphasize the processes and mechanisms by which organizations (or business units) strive to achieve ambidexterity, the realized one describes a state in which the organization has actually achieved high levels of exploitation and exploration. Structural ambidexterity refers to an organizational design or form containing not only separate structural subunits for exploration and exploitation, but also different competencies, systems, incentives, processes, and cultures for each unit (Benner and Tushman, 2003). For example, upstream units, such as production, are responsible for exploitation, while downstream units, such as marketing and sales, are responsible for exploration. These separate units are held together by a common strategic intent, an overarching set of values, and targeted structural linking mechanisms that enable a productive integration of independent efforts. Recently discussed by Gibson and Birkinshaw (2004), the behavioural view defines OA as the organization’s or business unit’s behavioural capacity to simultaneously © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License Organizational Ambidexterity Empirical Empirical Gibson and Birkinshaw (2004) He and Wong (2004) Theoretical Tushman et al. (1997) Empirical Theoretical Tushman and O’Reilly (1996) Theoretical Empirical McDonough and Leifer (1983) Benner and Tushman (2003) Theoretical Duncan (1976) Organization Business unit Organization Business unit Organization Organization Business unit Business unit Levels/unit of analysis Simultaneous Simultaneous Separation Simultaneous Separation Separation Separation Sequential Achieving balance Realized Behavioural Structural Realized Structural Structural Structural Structural View The need for an appropriate balance between exploration and exploitation . . . the capability to operate in both mature markets (where cost efficiency and incremental innovation are critical) and develop new products and services for emerging markets (where experimentation, speed, and flexibility are critical). Ambidexterity is the behavioural capacity to simultaneously demonstrate alignment and adaptability across an entire business unit. Alignment refers to coherence among all the patterns of activities in the business unit; they are working together towards the same goals. Adaptability refers to the capacity to reconfigure activities in the business unit quickly to meet changing demands in the task environment. Ambidextrous or dual organization forms are organizational architectures that build in both tight and loose coupling simultaneously. These organizational forms are not loosely coupled, nor do they switch between contrasting structures. Ambidextrous organizations are composed of multiple tightly coupled subunits that are themselves loosely coupled with each other. Simultaneously pursuing both routine and non-routine tasks. Ambidextrous organizations have multiple organizational architectures to concurrently nurture diverse innovation requirements that are capable of simultaneously creating both incremental and discontinuous innovation. Ambidextrous organizations are capable of operating simultaneously for the short and the long term, for both incremental and discontinuous innovation. Such dual organizations build in the experimentation, improvisation, and luck associated with small organizations, along with the efficiency, consistency, and reliability associated with larger organizations. The ability to simultaneously pursue both incremental and discontinuous innovation and change that result from hosting multiple contradictory structures, processes, and cultures within the same firm. Capacity of a work unit to employ several different structures simultaneously. Capacity of organizations to facilitate the differentiation of organization structure that facilitates the innovation process in its two different stages. More specifically, the ability of the organizational unit to deal with conflict, conduct effective interpersonal relations, develop switching rules, and institutionalize dual organizational structures for innovation. Definition Z. Simsek 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License © Blackwell Publishing Ltd 2009 Adler et al. (1999) Theoretical/empirical Author(s) Table I. Previous definitions of organizational ambidexterity 600 Theoretical Theoretical Empirical Empirical Empirical Empirical Empirical Empirical Lubatkin et al. (2006) O’Connor and DeMartino (2006) Venkatraman et al. (2006) Bierly and Daly (2007) Cegarra-Navarro and Dewhurst (2007) Sidhu et al. (2007) Smith and Tushman (2005) Gupta et al. (2006) Theoretical Kaplan and Henderson (2005) Firm Organization Organization Organization Business unit Organization Organization Firm Organization Organization Business unit Organization Sequential Simultaneous Simultaneous Both Simultaneous Simultaneous Simultaneous Simultaneous Separation Separation Simultaneous Simultaneous Realized Behavioral Realized Realized Realized Realized Realized Realized Structural Structural Realized Realized Firms that are able to manage supply and spatial exploration with demand-side exploitation in fast changing dynamic contexts and to juggle the balance so that they combine demand and spatial exploration with supply-side exploitation when the environment settles down. Ambidexterity is an organization’s context to achieve alignment and adaptability simultaneously within the organization learning processes. Paradoxical companies that are successful at simultaneous exploration and exploitation. The capability of an organization to simultaneously pursue exploration of new product markets while exploiting current product markets. The ability of business unit managers to simultaneously advance radical innovation initiatives while conducting daily operational functions. Ambidextrous firms are capable of exploiting existing competences as well as exploring new opportunities with equal dexterity. Ambidexterity refers to the synchronous pursuit of both exploration and exploitation via loosely coupled and differentiated subunits or individuals, each of which specializes in either exploration or exploitation. Firms that can develop and market both sustaining and disruptive innovations. Ambidextrous designs are organizational forms that build internally consistent architectures and cultures into business units so that the firm can both explore and exploit. These organizational architectures involve highly differentiated units as well as top management team integration. Organizations in which one part of the organization continues to operate much as before while another attempts to combine the best aspects of small, entrepreneurial firms with the advantages derived from being part of a more established company. The ability to pursue exploratory and exploitative innovations simultaneously. Simultaneous investments in both the exploitation of existing product innovation capabilities and the exploration of new ones. 601 © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License Danneels (2006) Empirical Theoretical Jansen et al. (2005) Empirical Atuahene-Gima (2005) Organizational Ambidexterity Z. Simsek demonstrate alignment and adaptability across the business unit as the organizational context encourages and supports individuals in their efforts to heed both of these concerns. Alignment refers to coherence among all patterns of activity, and adaptability to the capacity to reconfigure activities quickly to meet changing demands in the task environment. Thus, while the structural definition posits dual structures as the means to achieve OA, the behavioural definition proposes building a carefully selected set of systems and processes that collectively define organizational members’ behavioural context. That is, an organizational context may enable individuals to consider both exploitative and explorative aspects of their work; when they try to be effective (doing the right things), they also think about how to be efficient (doing the things right). Finally, the more prevalent, what we here label as the realized view, defines OA in terms of the organization’s exploitation and exploration attainments; for example, ambidextrous organizations successfully pursue both incremental and discontinuous innovations (Benner and Tushman, 2003; Smith and Tushman, 2005). What thus distinguishes this view from the first two is its explicit focus on the organization’s actual exploration and exploitation performance in defining OA. As can be seen from Table I, several researchers have conceptualized and tested OA in this manner, including He and Wong (2004), Lubatkin et al. (2006), and Venkatraman et al. (2006), among others. The varying conceptualizations shown in Table I suggest that the option for researchers to refrain from clearly defining OA in their work is no longer a viable one. In particular, we would suggest that exploitative and exploratory attainments explain what OA consists of, while structural and behavioural dimensions refer to an organization’s orientations and properties that might facilitate OA. Thus, casting a deliberately broad net, we define OA as the state of attaining exploitation and exploration with dexterity, or achieving high levels of both. Three key elements of this definition help to specify the OA construct. To begin, in keeping with March’s (1991) discussion of exploitation and exploration, we view OA as an organization-level construct that manifests itself in the organization’s exploitative and exploratory attainments. This may be an obvious characteristic, but we explicitly state it here to help further delineate what we do not mean by OA. For example, there may be individual, team, or functional usages or implications of the concept that are not related to the organization. As noted, adopting the organization as the unit of analysis also helps to differentiate OA from constructs such as structural ambidexterity (Benner and Tushman, 2003) and contextual ambidexterity (Gibson and Birkinshaw, 2004) that refer to the methods, practices, and processes that an organization uses to attain OA. Second, as Gupta et al. (2006) discuss, the central ambiguity regarding most previous definitions of exploitation and exploration lies in the type of learning versus the presence or the absence of learning. Thus, while some view them in terms of whether new learning occurs along the same trajectory as previous knowledge or along an entirely different one (e.g. Benner and Tushman, 2003; He and Wong, 2004), others (e.g. Rosenkopf and Nerkar, 2001; Vassolo et al., 2004; Vermeulen and Barkema, 2001) invoke them in terms of using past knowledge versus new learning, rather than the type of path taken. In defining OA, we build on Gupta et al. (2006) logic to suggest that, because all activity includes at least some learning, it is more logical to differentiate between exploration and © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License 602 603 exploitation by focusing on the type of learning entailed rather than on the presence or absence of learning. Finally, our proposed definition of OA highlights the idea of dexterity – achieving high levels of performance in exploitation and exploration. By so doing, we limit our focus to a simultaneous approach to OA, thus excluding the sequential or punctuated equilibrium one (Gupta et al., 2006). Punctuated equilibrium suggests that cycling between periods of exploration and exploitation is a more viable approach than simultaneously pursuing both. Duncan (1976), for example, suggested that an organization attains ambidexterity when it switches between alternative structural architectures, depending on where it stands regarding innovation. Similarly, based on his analysis of Intel Corporation, Burgelman (1991) argued that an organization can successfully explore at a given point in time and exploit at another point in time. By contrast, we posit OA as balancing high levels of exploitation and exploration, rather than periodically/spatially switching between them or balancing them at any level – an organization with low levels of exploitation and exploration is ‘balanced’, but not ambidextrous. Outcomes of Organizational Ambidexterity Theoretically, it is possible to conceptualize numerous consequences of OA for the organization. However, extant work has mainly focused on performance as the key outcome variable. Levinthal and March (1993) first explained how OA might enhance performance by proposing that exploitation and exploration are realized in categorically distinct, yet complementary, changes in performance by differently influencing the size, timing, and riskiness of the organization’s cash flows. Specifically, exploration, to the exclusion of exploitation, leads to too many undeveloped ideas and not enough distinctive competence. Conversely, exploitation without exploration creates a ‘competency trap’ (March, 1991). Thus, their joint pursuit should enhance performance by enabling an organization to be innovative, flexible, and effective without losing the benefits of stability, routinization, and efficiency. Building from this ‘ambidexterity premise’, studies have stressed the need for organizations to pursue OA to improve performance; however, in aggregate, the findings have been equivocal. Although some researchers have found that OA directly impacts performance (e.g. Gibson and Birkinshaw, 2004; He and Wong, 2004; Lubatkin et al., 2006), others have found a contingent effect (e.g. Lin et al., 2007), and some a negative effect (e.g. Atuahene-Gima, 2005). A more recent study ( Yang and Atuahene-Gima, 2007) finds evidence that OA is curvilinearly related to performance while another one finds no support for the ambidexterity hypothesis (Venkatraman et al., 2006). Moreover, in the few studies where researchers have considered how environmental factors and other moderators might condition the impact of OA on performance, they have considered this in the context of exploitation and exploration, rather than OA per se (e.g. Auh and Menguc, 2005; Jansen et al., 2006). There has, to date, been no conceptual attempt at reconciling these inconsistent findings. Thus, the question of whether and under what conditions OA leads to improved performance remains poorly developed. In line with some who have suggested © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License Organizational Ambidexterity Z. Simsek that the simple, bivariate effects may be inadequate to explain the relationship between OA and performance (e.g. Jansen et al., 2005, 2006), we will propose that an essential key to understanding the OA–performance relationship is to analyse the context in which it occurs. Antecedents of Organizational Ambidexterity As noted at the outset, three distinct sets of antecedents of OA have to date been advanced: dual structures, organizational context, and TMT characteristics. Although the origins of dual structures may be traced to Duncan (1976), the recent resurgence of interest in this notion may be largely attributed to Tushman and O’Reilly (1996). In essence, these scholars posit that OA is achieved when one or more business units in the organization focus on exploiting and one or more on exploring. Jelinek and Schoonhoven (1993) also discuss the notion of semi- or quasi-structures, arguing that the challenge of major innovation requires a dual structure that fosters both discipline and creativity. They claim that structural independence ensures that the distinctive processes, structures, and cultures of exploratory units are not overwhelmed by the forces of exploitative culture. Conversely, established units can simultaneously focus on serving current customers and engaging in exploitation without the distraction and pressures of undertaking exploratory initiatives. Dual structures within the same organization, however, can also lead to isolation and the failure of individual units to productively couple their efforts. OA is achieved through distinct units ‘held together by a common strategic intent, an overarching set of values, and targeted structural linking mechanisms to leverage shared assets’ (O’Reilly and Tushman, 2007, p. 22). Contrary to the dual structural architecture approach arguing for an organizational partitioning of exploitation and exploration in distinctive subunits for attaining OA, the behavioural view posits OA as a function of a high performance context in which individuals are embedded, a concept borrowed from the strategy process literature (Ghoshal and Bartlett, 1994). Thus, rather than adopting a dual structural architecture, managers are expected to create a context that enables and encourages staff members to use their own judgment on dividing their time between exploration and exploitation (Birkinshaw and Gibson, 2004). Gibson and Birkinshaw (2004) conceptualize this high performance context on the basis of Ghoshal and Bartlett’s (1994) behaviour framing attributes of discipline, stretch, support, and trust. In particular, Gibson and Birkinshaw (2004) group such mechanisms in two interdependent and complementary behaviourframing attributes: performance management and social support. The former (a combination of stretch and discipline), on the one hand, reflects how an organization induces its employees to voluntarily strive for more ambitious, stretching goals, and outcomes. Social support (a combination of support and trust), on the other hand, reflects the necessity of ensuring that individuals establish ambitious goals within a cooperative work environment, as well as inducing employees to lend assistance and countenance to others and to rely on each other’s commitments. The interaction of these meta-constructs (performance management and social support) creates a high performance organizational context that in turn gives rise to OA. © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License 604 605 It is noteworthy to observe that researchers working from both structural and contextual explanations similarly recognize an indirect, yet pivotal, role of senior executives in the organization’s ability to attain OA.[3] For example, dual structures within the same organization can lead to isolation and the failure of individual units to productively couple their efforts. Strategic integration and, as a result, OA, occurs when aspirations are common and when an ambidextrous senior team coalesces (Tushman and O’Reilly, 1996). Burgelman (2002) describes these complex managerial integration processes and specifically identifies the need for ‘strategic debate’ – that is, senior leaders who encourage dissenters to argue their points. Thus, while organizational members are isolated from the conflicting demands of OA, upper-echelon executives are ultimately expected to drive the organization towards ambidexterity. Likewise, establishing a high performance behavioural context requires managerial guidance regarding transparency in access to resources, autonomy to take initiatives, and equity and fairness in decisionmaking processes (Gibson and Birkinshaw, 2004). Enriching these structural and contextual explanations, scholars have recently started to examine TMT characteristics and processes that can directly enable the organization to manage and embrace the contradictions that they face. For example, Smith and Tushman (2005) theorize that establishing paradoxical cognitive frames and processes among senior executives enables the organization to balance strategic contradictions between exploration and exploitation. Lubatkin et al. (2006) synthesized these upperechelons arguments by focusing on the pivotal role of behavioural integration, an all-inclusive TMT process construct that captures the level of the senior team’s wholeness and unity of effort. Because a behaviourally integrated team synchronizes the social and task processes associated with collaborative behaviour, quality of information exchange, and joint decision making (Hambrick, 1995; Simsek et al., 2005), they argued that a behaviourally integrated TMT acts as a forum in which executives openly and freely exchange differing knowledge, resolve conflicts, and create a set of shared perceptions, which then can be integrated and acted upon to facilitate OA. A MULTILEVEL MODEL OF ORGANIZATIONAL AMBIDEXTERITY As the above review shows, most OA research consists of a single focus (e.g. dual structures, behavioural contexts, or TMTs). Another common (and probably the most common) focus in OA research has thus far been examining the ‘bivariate’ or main effect relationship between OA and performance. Although potentially relevant to one another, these variables and explanations have been discussed independently with little conceptual cross-fertilization. Thus, while previous research has established that OA may not be as difficult or elusive for organizations to achieve as some in the literature believe, it has remained limited due to the absence of any synthesizing efforts. As a first step, we offer a multilevel model[4] (Figure 2) that both integrates and extends previous research. In essence, the model posits that OA is jointly influenced by factors residing at the organization, interfirm, and environment levels. The model also illustrates these three levels by integrating the various insights from prior research while specifying the dominant and novel relationships. While OA has not been related to interfirm-level analysis © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License Organizational Ambidexterity Z. Simsek Organization Level • Dual structure (P1B and 2B) • Behavioural context (P3A and3B) • Top management team behavioural integration (P4A and 4B) Organizational ambidexterity Organizational performance Interfirm Level • Centrality (P1A) • Diversity of ties (P2A) Environment Level • Dynamism (P5A, 5B and 7) • Complexity (P6A, 6B and 8) Figure 2. A multilevel model of organizational ambidexterity to date, the notion that network ties are a key vehicle for both exploitation and exploration is the basis for an important stream of research (e.g. Powell et al., 1996). A key idea to this line of research is that organizations are embedded in the structure of their network relations that constrain and enable their behaviour and economic action. From this research, we borrow two constructs that, we argue, will particularly impact OA: a superior structural position in the network and diverse network ties. Being centrally positioned in a network has been recognized as a particularly important structural position in alliance network; thus, our model considers centrality (Powell et al., 1996). Additionally, because an organization’s strategic outcomes are affected by the qualitative nature of network relations (e.g. Beckman and Haunschild, 2002; Parkhe, 1991; Powell et al., 1996), our model specifies diversity of the organization’s network as another salient influence on OA. At the organization level, the model specifies dual structures, behavioural contexts, and TMT behavioural integration. Next, the model suggests that these variables interact to influence OA. Our underlying logic here is that organization- and interfirm-level, as well as environmental factors might combinatorially exert influences on OA. As we demonstrate below, a thorough examination of these multilevel influences may be critical in understanding where OA come from and how it matters to performance. For example, as noted earlier, research on the performance implications of OA has yielded mixed results. Our model suggests that an improved understanding of this relationship can be gained by considering the combined significance of OA and environmental uncertainty. This expectation is broadly grounded in the notion of strategic fit (Hambrick, 1983), which suggests that the appropriateness of an organization’s strategy can be defined in terms of its fit or congruence with the environmental contingencies facing the organization. The concept of fit has theoretical roots in contingency perspectives (e.g. Burns and Stalker, 1961; Lawrence and Lorsch, 1967; Miller and Friesen, 1983), which suggests that congruence or fit among key variables, such as environment, structure, and strategy, is critical for obtaining higher performance. For example, the effectiveness of a strategic orientation (Hambrick, 1983), © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License 606 607 an entrepreneurial orientation (Lumpkin and Dess, 2001), or innovativeness (Zahra, 1996) depends on environmental uncertainty. Consistently, our model posits that uncertainty is likely to modify the impact of interfirm variables on OA, as well as the impact of OA on performance. Although there are multiple ways to characterize environmental uncertainty, following Dess and Beard (1984) the model includes two widely accepted constructs, dynamism and complexity. It is our core intention to provide an integrative, multilevel understanding of OA. However, in the interest of generating sufficient depth, our propositions address what we see as the most novel theoretical contributions to the literature. Particularly, we advance and build several multilevel propositions that explain the interactive influences of the model’s variables on OA, as well as the moderating role of environmental uncertainty in explaining OA’s relationship to performance. We do not discuss some main effects in our model (e.g. those coming from organization-level variables or environmental-level variables), because they have been examined previously. Thus, for example, while environmental factors might directly influence OA (e.g. Floyd and Lane, 2000; Jansen et al., 2005; Levinthal and March, 1993), we selectively limit our focus to these factors’ moderating role in explaining the relationship between the network variables and OA, between OA and performance. SOME SELECTED PROPOSITIONS The Interaction of Interfirm and Organization Levels Research suggests that an organization’s central network position affects its access to valuable knowledge and resources (e.g. Powell et al., 1996). Network centrality generally denotes the extent to which an organization is well connected to others in a network. Scholars use a variety of constructs and measures to describe centrality; the most important are degree, closeness, and betweenness (Wasserman and Faust, 1994). We have chosen closeness because it is considered a global measure of centrality as it captures the total impact of direct and indirect ties (Scott, 1991). It is usually computed for a focal actor as the average distance between that actor and other members of the network (Freeman, 1979). An actor with high closeness centrality can access other members of the network with the fewest links. Thus, the actor is fairly close to the majority of other actors in the network, which is consistent with the intuitive notion of being in the centre. Is OA more likely when an organization is most central to the network, or when it is less central? Taken together, previous research on network centrality suggests something of a paradox regarding the potential impact of centrality on OA. On the one hand, research suggests that centrality is likely to confer upon the organization complementary information and resource advantages that might be beneficial to the attainment of OA. As discussed, among others, in studies by Powell et al. (1996, 1999), Soh (2003), and Bell (2005), an organization that is centrally positioned in a network relative to others can expect greater benefits in terms of knowledge spillovers and information flows than peripheral actors. Central organizations, because of their more numerous direct and indirect connections to others, have more relationships to draw upon in obtaining © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License Organizational Ambidexterity Z. Simsek resources and so are less dependent on any single organization to explore (Scott, 1991). In addition, the access facilitated by centrality means a higher likelihood of exposure to the various disparate social circles within the network and to more clusters, or pockets, of highly connected organizations (e.g. Powell et al., 1996). As a consequence, exploitation is also enabled because central organizations become better informed about what is going on in the network. In combination, these benefits should facilitate OA. On the other hand, there may be a point of diminishing returns to centrality, where numerous ties are no longer advantageous. Specifically, we expect the positive effect of centrality to diminish, eventually reversing itself at higher levels when the marginal benefits are overwhelmed by the marginal costs of centrality. The existence of an inflection point in the relationship between centrality and OA is related fundamentally to the allocation of attention and information overload. An organization that is too central may be pulled in too many directions (Scott, 1991). Since the central organization has to spread a limited amount of time across a large number of contacts, the amount of time given to each contact diminishes. As a result, the intensity of each contact decreases, and helpful information and resources are less likely to surface. Additionally, large quantities of information emanating from numerous connections might overwhelm the organization’s information processing capacity.[5] For the central organization entrenched in the network, more information will not necessarily be helpful and might, in fact, be dysfunctional, given that any organization’s information and knowledge processing capacity is limited. It has long been argued that organizations often develop information filters, procedures, and routines to reduce the costs of information acquisition and utilization and to cope with bounded rationality (Arrow, 1974; Cyert and March, 1963; Nelson and Winter, 1982). If information overload occurs due to the organization’s numerous connections, the central organization may further routinize its filters to focus on certain information and regard other information as unimportant. Confirming this, researchers (e.g. Koka and Prescott, 2002) suggest that when information munificence is low, organizations process low amounts of information; when moderate, organizations process the highest amount of information; and when high, they exhibit signs of cognitive strain and revert to processing low amounts of information. Thus, in excess, centrality can become a source of confusion and information overload. Taken together, these arguments suggest an inverted U-shaped relationship between network centrality and OA, such that high levels of centrality might improve the organization’s ability to attain OA but after some point, centrality hinders this ability. Put simply, a moderate level of network centrality is ‘optimal’, and will have most positive consequences for OA. Proposition 1A: Network centrality has a curvilinear (inverted U-shaped) relationship with OA. One variable that is likely to modify the eventual impact of centrality on OA is the organization’s structural architecture. In particular, we expect that the impact of centrality on OA is likely to be contingent upon whether or not the organization employs a dual structure, where some business units focus entirely on exploration and others on exploitation. As noted earlier, this should minimize the need to integrate conflicting © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License 608 609 resources and information within a single structural solution and enable exploitative and exploratory network benefits to be leveraged simultaneously. In particular, we expect that when a dual structure exists, the organization is more likely to extract from its network of ties the information and knowledge that OA demands. Consider, for example, the earlier argument that at relatively high levels, centrality might negatively impact OA because large quantities of knowledge, resources, and information emanating from numerous connections might overwhelm the organization’s information processing ability. In this case, if the organization has a dual structure in place, this negative impact will be dampened because small and decentralized exploratory units will help to more effectively extract exploratory information and benefits from network ties, while more centralized, tight cultures and processes of the exploitation units will help to extract exploitative ones. Thus, a dual structure should enhance the organization’s ability to more effectively process large quantities of knowledge and information emanating from its numerous connections. It then follows that while a moderate level of network centrality is likely to be conducive to OA, this relationship is likely to be strengthened in the context of a dual structure. Proposition 1B: A dual structural architecture positively moderates the curvilinear relationship between network centrality and OA, such that when an organization has this structure, the apex of the curve will shift to the right and upward, further increasing OA. In addition to centrality, we also expect an influence of the organization’s network tie diversity on OA. Network diversity has been conceptualized in numerous ways (e.g. Beckman and Haunschild, 2002; Parkhe, 1991). In social network research, it concerns the flow of information – in particular, the extent to which the information provided by actors’ (individuals or organizations) networks is similar or redundant (Burt, 1992; Granovetter, 1973; Krackhardt, 1992). The notion of range, the number of different social systems the organization’s relationships stems from, captures an organization’s network diversity (Powell et al., 1996). Such diversity may result from several factors, including the value chain function of the organization’s alliances (e.g. upstream vs. downstream partners; Koza and Lewin, 1998), the network position of an organization’s alliance (e.g. recurrent ties vs. new ties; Beckman et al., 2004), and intertemporal variance in the organizational attributes of an organization’s partners (e.g. experience, size, and industry focus; Beckman and Haunschild, 2002). For example, an organization that spreads its network connections across multiple industries has higher network diversity than an organization that concentrates its connections within few industries. Network diversity provides the organization multiple benefits from the perspectives of attaining OA. First, it provides the organization with the benefit of heterogeneity in its problem-solving arsenal. An organization that has a homogenous network has little opportunity to consider multiple perspectives because most network members see the world similarly. By contrast, diverse ties imply organizations that may differ in their modes of reasoning and problem formulation and solution. Exposure to these different approaches adds to the repertoire that the organization can bring to bear on exploitation and exploration. For example, it may lead to constructive conflict, yielding deeper and © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License Organizational Ambidexterity Z. Simsek more comprehensive analysis of design problems, and novel framing of opportunities (Baum et al., 2000b; Beckman and Haunschild, 2002). Second, diverse network ties are valuable to OA because they can help the organization overcome the familiarity trap, that is, a tendency to favour the familiar over the unfamiliar (Ahuja and Lampert, 2001). Ties with more than one organization with similar characteristic do not provide access to new information, whereas organizations with greater diversity in their interfirm networks obtain more novel information than those with restricted networks (Burt, 1992; Granovetter, 1973). As new technologies are observed and studied via diverse ties, the stability of existing cognitive structures and cause–effect relationship is challenged (Ahuja and Lampert, 2001). New world-views have to be developed that account for both the known as well as the unfamiliar, and this process can have beneficial influences on OA. Without exposure to novel technologies and the novel mode of reasoning, the capacity of the organization for OA might be hampered. Third, diverse ties can also promote OA by enabling organizations overcome the propinquity trap, a tendency to search for solutions that are in the neighbourhood of existing solutions rather than search for completely de novo solutions (Ahuja and Lampert, 2001). Diverse ties enable the organization to access a wider circle of information about potential markets, new business opportunities, innovations, and sources of capital, and potential customers. Thus, an organization with heterogeneous partners is likely to not only have access to more complementary resources but also to know more about how to productively put these resources into use (Burt, 1992). To the theory of recombinant invention (Fleming, 2001; Henderson and Clark, 1990), inventions are commonly the result of combining and recombining elements of old (familiar) and new (unfamiliar) knowledge into new combinations. The less knowledge alliance partners hold in common, the greater are their opportunities to combine distinctive knowledge in a complementary way. Conversely, if the organization extensively searches for or is limited to solutions in the neighbourhood of existing solutions, then its solution domain is likely to be too narrow to support OA. Nonetheless, we should also note that the literature also suggest at least three negative consequences of tie diversity for the organization. First, diversity might dynamically increase costs of integrating new knowledge. As the diversity of the firm’s network and consequently, unfamiliar streams of knowledge to be processed and integrated into a firm’s knowledge base increases, so do the technological and organizational challenges in integration (Katila and Ahuja, 2002). Second, to the extent that managing heterogeneous partners requires a different set of skills and expertise, procedural differences and communication barriers will make it harder to exploit synergies across them. Finally, the organization may also find it difficult to manage and monitor its diverse network of alliances. Despite these effects, however, we generally expect a positive linear relationship for several other reasons. First, given the conflicting and diverse knowledge and resource inputs that OA demands, we believe that downsides associated with diverse ties might not be powerful enough to cause a downward slope in the positive impact of tie diversity on OA. In such a circumstance, although excessive diversity will have significant costs, these costs may not be eventually reflected in a decline in OA. Second, when an © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License 610 611 organization has diverse ties, it is more likely to develop mechanisms to deal with the diversity. In fact, firms often form alliances to combine their expertise in different component technologies, and to solve complex problems that require varied scientific experience (Grant and Baden-Fuller, 1995). Reagans and McEvily (2003) argue that organizations accustomed to interacting with contacts from diverse communities of practice have a greater opportunity to learn how to interact with other organizations and how to extract complex benefits from these relationships than are organizations limited to interactions within a homogenous network. Finally, there is also the possibility that not many firms are likely to reach a level of diversity that is sufficiently high for the negative effects of diversity to significantly decrease OA. This is consistent with evidence reported in Katila and Ahuja (2002) and Ahuja and Lampert (2001), who suggest that a limited number of companies are likely to over-search because of the high costs that doing so entails. While emphasizing that organizations are likely to achieve network diversity without suffering network overload, we are, however, operating under all else being equal assumption. Indeed, as we will discuss, the organization’s ability to avoid these potential downsides as they pursue the advantages of network diversity will be critically shaped by its own and environmental contingencies. Formally stated: Proposition 2A: Diversity of the organization’s network of ties is positively related to OA. Nonetheless, whether and by how much the organization might capitalize on such diverse opportunities might be critically dependent upon whether the organization adopts a dual structure. It is unlikely that a single structure would be capable of effectively handling the complex array of factors and benefits that diverse contacts entail, all of which must be dealt with simultaneously to enhance the organization’s OA. Without a dual structure, problems might arise due to the dynamically increasing costs of integrating new information and knowledge that arise from diverse ties. As diversity of ties increases, so do the technological and organizational challenges of integration. The more diverse the knowledge to be integrated, the more complex become the problems of creating and managing integration. Dual structural architectures provide the organization with enhanced capabilities to handle such diversity, thus boosting the organization’s ability to identify valuable knowledge, develop connections, and combine information in ways that promote OA. Thus, we expect that: Proposition 2B: A dual structural architecture positively moderates the relationship between network diversity and OA, such that when an organization has this structure, the relationship will be stronger. We expect that an organization’s behavioural context will play a similar moderating role in explaining the relationship between network centrality and diversity and OA. Gibson and Birkinshaw (2004) showed that OA is enhanced by a behavioural context that embodies both performance management (a combination of stretch and discipline) and social support (a combination of support and trust). Performance management and social support are equally important and mutually reinforcing; the strong presence of © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License Organizational Ambidexterity Z. Simsek each will create a high-performance organizational context (Birkinshaw and Gibson, 2004). Thus, high performance contexts are expected to balance the hard elements (discipline and stretch) and the soft elements (support and trust) in their organizational contexts. Enriching Gibson and Birkinshaw (2004), we posit that an organization’s behavioural context will be an important determinant of whether the organization more fully leverages OA opportunities provided by its network position and diversity. In a high performance context, the context is dynamic and flexible enough to allow organizational members to pursue both exploitative and exploratory initiatives and activities, both of which are valued and rewarded. Thus, when performance context is high, individuals in the organization focus on pursuing exploitative initiatives, but at the same time also look for explorative opportunities. Without a high-performance behavioural context, organizational members’ behaviour might critically hamper the organization’s ability to fully benefit from its network of relationships. For example, it intuitively makes sense that the positive impact of centrality and diversity are further enabled in behavioural contexts because individuals in high-performance contexts might be more prone to engage in boundary spanning activities, and therefore, more fully utilize all available network resources. Similarly, we might expect that more extensive and efficient informational distribution systems in such a context, suggesting that benefits of network centrality and diversity are likely to be more fully leveraged. As such, we expect that in a high behavioural context, the negative influences of high centrality and diverse ties on OA are likely to be dampened and restricted, while their positive influences are likely to be enhanced. Proposition 3A: Behavioural context positively moderates the curvilinear relationship between network centrality and OA, such that in a high-performance context, the apex of the curve will shift to the right and upward, further increasing OA. Proposition 3B: Behavioural context positively moderates the relationship between network diversity and OA, such that in a high-performance context, this relationship will be stronger. Several researchers have suggested that the TMT can alleviate the conflicts and trade-offs associated with the organization’s pursuit of OA. For example, Smith and Tushman (2005) argue that the TMT makes decisions regarding organizational forms, cultures, and resource allocation processes such that their organizations can both explore and exploit. Such potential notwithstanding, however, the ability of senior managers to guide the organization in ways that promote OA is not a given. Tushman and O’Reilly (1997) have suggested that OA is particularly facilitated by top teams’ internal processes ‘that enable them to handle large amounts of information and decision alternatives and deal with conflict and ambiguity’ (Tushman and O’Reilly, 1997, p. 23). Drawing from this insight, Lubatkin et al. (2006) singled out a top team’s level of behavioural integration as a key contributor to the organization’s ability to attain OA. Hambrick (1994) originally proposed the concept of TMT behavioural integration as a metaconstruct intended to capture three key interrelated and reinforcing elements of © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License 612 613 the TMT process: (1) level of collaborative behaviour; (2) quantity and quality of information exchanged; and (3) emphasis on joint decision making. Hambrick contends that behavioural integration is a more comprehensive attribute of a team’s integrative ability, whereby interrelated social and task-related processes collectively capture ‘the degree to which the group engages in mutual and collective interaction’ (1994, p. 188). Recent research has advanced behavioural integration’s authenticity by developing a reliable measure of it and confirming its multilevel origin (Simsek et al., 2005). In addition, there has also been work on behavioural integration’s consequences. For example, Hambrick (1995) noted that organizations that have difficulty adapting to external challenges in a timely manner have the least integrated TMTs. Siegel and Hambrick (1996) argued that behaviourally integrated teams make better use of knowledge alternatives because cognitive conflict in such teams affords them more opportunities to debate and discuss strategic issues. Similarly, Hambrick (1998) concluded that behavioural integration enables the TMT to combine knowledge and insights to respond well to the increasing needs of the market, create core competencies, and develop global strategies. Li and Zhang (2002) found that behavioural integration facilitated product innovation intensity. Extending this line of research into the domain of OA, Lubatkin et al. (2006) argued that behavioural integration directly influences how a TMT deals with the contradictory knowledge processes that underpin the attainment of an exploitative and exploratory orientation, such that greater integration enhances the likelihood of jointly pursuing both. We reason from this line of research that the level of TMT behavioural integration will also play a pivotal role in modifying the impact of network centrality and diversity on OA. Specifically, we expect that when a TMT is behaviourally integrated, the resultant synchronization of the social and task processes associated with collaborative behaviour, quality of information exchange and joint decision making among senior executives can promote a deeper understanding and utilization of exploratory and exploitative opportunities provided by network centrality and diversity. Or, as Hambrick (1998) observed, behavioural integration enables the TMT to combine knowledge and information resources in ways that can create new insights and competencies regarding the organization’s strategic options. Additionally, we expect that behavioural integration will enable the organization to better reconcile and manage the contradictory information and resource benefits associated with centrality and diversity. Conversely, absent behavioural integration and the associated interaction and collaboration, team members are more likely to resolve any dissonance they face by focusing ‘on their own piece of the enterprise’ (Hambrick, 1998, p. 123). At this extreme, TMT coordination is more likely to be limited to bilateral exchanges coupled with infrequent and highly distilled communication (Hambrick et al., 2001). Thus, less behaviourally integrated TMTs are more prone to divert their attention to team maintenance, as well as require costly formal rules to function (Smith et al., 1994); all of which might detract attaining OA. Thus, we predict that: Proposition 4A: The level of TMT behavioural integration positively moderates the curvilinear relationship between network centrality and OA, such that when it is high, the apex of the curve will shift to the right and upward, further increasing OA. © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License Organizational Ambidexterity Z. Simsek Proposition 4B: The level of TMT behavioural integration positively moderates the relationship between network diversity and OA, such that when it is high, this relationship will be stronger. The Interaction of Interfirm and Competitive Environment Levels Dynamism refers to both the rate of change and unpredictability of change in an organization’s environment; it ranges from highly stable to highly dynamic (Dess and Beard, 1984). In highly dynamic environments, there is rapid and discontinuous change in demand, competitors, technology, and/or regulations such that information is often inaccurate, unavailable, or obsolete (Eisenhardt and Bourgeois, 1988). Dynamic environments thus demand that the organization develop adaptive responses quickly and expand the scope of information acquisition and gathering (Sidhu et al., 2004). In so doing, dynamism imposes a challenge to the organization by demanding flexibility and agile actions ranging from information scanning, selection, and processing to interpretation (Miller and Friesen, 1983). Given this, we posit that overreliance on existing interfirm relations in a highly dynamic environment may prevent the centrally positioned organization from registering and/or responding to environmental dynamism in timely manner and as a result, its ability to pursue OA might suffer. The key reason is that given the aforementioned requirements of dynamism, the marginal costs of centrality are likely to increase at a faster rate than they do in stable environments. Specifically, coordination, information processing, collaboration and so forth become more costly and difficult to manage in a dynamic environment because of rapidly unfolding conditions and contingencies. We thus expect that when an organization is central to the network, it is likely to experience delayed or inadequate responses to increasing dynamism; hence, its level of OA will be reduced. Accordingly, we predict that: Proposition 5A: Environmental dynamism negatively moderates the curvilinear relationship between network centrality and OA, such that when dynamism is high, the apex of the curve will shift to the left and downward, thereby decreasing OA. We similarly propose that although diverse ties may have beneficial influences on OA, these beneficial influences are likely to be dampened in dynamic environments. As was argued earlier, for organizations to be able to improve their OA from diverse network ties, they must first sufficiently access, process, and utilize diverse information and knowledge benefits that these ties enable. Yet, in dynamic environments where a high frequency of unexpected and novel changes are occurring, the organization is likely to find it difficult to respond with such objective and formal procedures. Put in slightly different words, dynamism may force the organization to develop solutions by taking actions quickly without less integration and utilization of various benefits that network ties entail. In addition to reducing the benefits that can be attained from diverse ties, environmental dynamism can also simultaneously exacerbate potential costs associated with diverse ties, which involve organizations that have different knowledge bases, organizational structures, and dominant logics. Accordingly, we posit that while network © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License 614 615 diversity is fundamentally beneficial to OA, this beneficial impact may be undermined in dynamic environments due to increasing communication problems, conflict, and integration issues among network members. Specifically: Proposition 5B: Environmental dynamism negatively moderates the relationship between network diversity and OA, such that when dynamism is high, this relationship will be weaker. Complexity (Figure 2) refers to the dissimilarity of environmental elements and the extent of their interconnectedness, ranging from highly simple to highly complex (Dess and Beard, 1984; Miller and Friesen, 1983). An organization’s environment is more complex to the extent that the organization needs to consider heterogeneous actors and a range of activities, linkages, and interactions outside its boundaries in strategic decision making. A complex environment will be perceived as more uncertain and requiring more information processing than a simple environment (Dess and Beard, 1984). For example, an industry composed of many direct and indirect competitors, in which the product is sold through a large number of channels and where technology changes rapidly, is complex and poses considerable demands on the organization, compared to a more simple and homogeneous environment. Given these influences and demands of complex environments, we envision that network centrality and diversity might lead to greater OA in complex than simple environments by helping the organization reduce and/or absorb complexity (Boisot and Child, 1999). Particularly, while complex environment demands greater levels of OA, centrality and diversity enhance the organization’s ability to develop ambidextrous responses to maintain an appropriate level of fit with the environment (complexity reduction), as well as strategic flexibility such that complexity does not mitigate its ability to develop appropriate actions (i.e. complexity absorption) (Boisot and Child, 1999). Put differently, because complex environments place a premium on differing knowledge and perspectives necessary to develop and evaluate solutions to complex and multifaceted problems, complexity is likely to increase the beneficial influences of network centrality and diversity on OA. For example, the organization needs to generate greater and more diverse information pertaining to various aspects of the environment to reduce the complexity it faces. Because, like individuals, organizations have limited information processing capacity (i.e. ‘bounded rationality’), network centrality and diverse ties might help the organization access quality information to recognize opportunities and/or threats hidden in a complex environment. Indeed, research by Powell et al. (1996) suggests that in industries that are complex and expanding, with sources of expertise that are widely dispersed, network ties tend to become salient predictors of the organization’s innovation performance. Similarly, through central and diverse network connections, the organization is better positioned for developing the more complex responses that may be needed to attain OA in a complex environment. To recap, complexity, like dynamism, implies imperfect and uncertain competitive markets; however, we expect differing moderating implications for OA. Whereas the imperfections associated with complexity are potentially subject to discovery, evaluation, and exploitation, those associated with dynamism cannot be so readily dealt with because © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License Organizational Ambidexterity Z. Simsek they are largely unpredictable. Put differently, while dynamism gives rise to the inability to predict or foresee, complexity is primarily associated with difficulties in monitoring and understanding environmental implications for strategic actions. And given that a moderate level of centrality and network diversity provide the organization with rich information and resource benefits that help it reduce and/or absorb complexity, we expect that network centrality and diverse ties will be more conducive to OA in a complex than in a simple environment. Proposition 6A: Environmental complexity positively moderates the curvilinear relationship between network centrality and OA, such that when complexity is high, the apex of the curve will shift to the right and upward, further increasing OA. Proposition 6B: Environmental complexity positively moderates the relationship between network diversity and OA, such that when complexity is high, this relationship will be stronger. Organizational Ambidexterity, Competitive Environment and Performance As discussed, stable environments enable organizations to manage by established routines, as learning requirements are minimal due to slowly changing customer preferences, technologies, and competition (Miller and Friesen, 1983). A stable environment increases the likelihood that the critical variables can be identified, and it allows more precise understanding to be developed regarding the potential impact of those variables on the organization. Senior executives in such a context have the luxury of added stability and predictability of change, as well as greater ability to react and adapt to the environment. Thus, it can be argued that in environments with little dynamism, the need to continually introduce new innovations is not necessary for enhancing performance because the organization might benefit more by being exploitative. Conversely, organizations competing in dynamic environments must be strategically flexible and efficient because customer needs and competitor activities demand immediate action (Sidhu et al., 2004). Indeed, researchers working from a population ecology view of the organization (e.g. Hannan and Freeman, 1977, 1989) have long suggested that specialists (those that practice only exploitation or exploration) function better in a non-turbulent environment, while generalists (those who have OA) are more likely to flourish in a turbulent one.[6] Similarly, strategy researchers, such as Lumpkin and Dess (1995), have argued that dynamism may create performance problems for organizations using a simple strategy-making process. That is, a strategy-making process that relies on established routines and practices, or one that draws on a restricted competitive arsenal or a small assortment of decision-making tools, may be ineffective in an environment that requires responsiveness and flexibility. Consequently, we expect that when the organization successfully pursues OA in a dynamic environment, this should enhance its performance, because while exploration helps encounter rapid obsolescence of products and services, exploitation ensures system efficiency and a steady stream of cash flows ( Jansen et al., 2005). In such a context, it will be risky for the organization to focus exclusively on either exploration or exploitation © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License 616 617 because dynamic environments make current products and services obsolete while instantaneously requiring that new ones be developed ( Jansen et al., 2006). Overexploitation in dynamic environments may result in competence trap (Levinthal and March, 1993). At the same time, over-exploration for the purpose of flexibility can result in chaotic organization, which makes it difficult to develop core competencies. Thus, in dynamic environments OA should lead to increased performance because without an appropriate level of OA, the organization would be neither dynamic nor adaptive. Conversely, in stable environments it might be more beneficial for organizations to fully exploit their competitive advantage in either exploitation or exploration. As such: Proposition 7: Environmental dynamism positively moderates the relationship between OA and organizational performance, such that when dynamism is high, this relationship will be stronger. As noted, environmental complexity is characterized by a wide array of customers, competitors, and diversity in the type of marketing and production methods needed to cater to the different segments of a market. When complexity is low, organizations can operate within their existing systems to improve their efficiency (e.g. maintaining the same product line, manufacturing process, and market practices year after year). Conversely, under conditions of high complexity, a simplistic strategic pursuit that concentrates on ‘a single way of conducting business or in one dominant element of strategy’ (Miller, 1993, p. 121) may lack the variety needed for effectiveness in the environment. Confirming this, Miller and Chen (1993) found that simplicity of competitive repertoires is especially harmful for organizations in a complex environment, and Lumpkin and Dess (1995) found that organizational performance suffers if an overly simple strategymaking process is used in complex environments. Similarly, Jansen et al. (2006) reported evidence indicating that organizations can successfully operate in a highly competitive environment by both exploring (expanding current products and services) and exploiting (defending existing markets). Although these studies were not explicitly testing OA, they suggest that the pursuit of OA can lead to increased performance as environmental complexity increases because OA represents a wider-scope strategy that organizations can use to cope with increased exploitation and exploration demands of complex environments. Thus: Proposition 8: Environmental complexity positively moderates the relationship between OA and organizational performance, such that when complexity is high, this influence will be stronger. DISCUSSION Our intent was to take stock of the current body of knowledge, further specify the OA construct, and develop a more encompassing model of OA. To that end, we first reviewed extant research using an input–process–output framework. We then elaborated upon a simple, yet coherent, multilevel model that not only discerns the key organization-level determinants of OA suggested in previous research, but also specifies © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License Organizational Ambidexterity Z. Simsek the shaping influences of interfirm networks and competitive environments on OA. Below, we discuss some additional research implications that emerge from our work and offer several suggestions for future inquiries on OA. Future Research Implications Although our propositions hold promise for future research, we see the need and opportunity for other inquiries on OA. First, we focused on selected constructs to develop our arguments and propositions. While this strategy helped us to maintain conceptual clarity and parsimony, we may have overlooked other variables. Thus, we encourage more research on the organization, interfirm, and environmental determinants of OA. Second, although some of our model’s variables from each level might be related, we discussed them separately to more fully examine their interactive, cross-level influences on OA. For example, Birkinshaw and Gibson (2004) suggest that structural and behavioural contexts complement each other in shaping OA, and that many successful companies use a combination of both to attain OA. Likewise, it is possible that network centrality and diversity will interact to impact OA. Indeed, our arguments suggest that an organization connected to a heterogeneous partner will gain more information advantage if it also possesses a moderate amount of network centrality. In short, more research that examines how variables from each level of analysis reinforce or undermine one another to shape OA is needed. Third, in extending the OA–performance link, we explored the moderating effects of environmental complexity and dynamism; however, several other environmental and organizational characteristics might moderate this link as well. Research that examines such factors will be helpful not only for building a more complete theory of OA, but also for identifying factors that might need managerial attention in pursuing OA to enhance performance. Fourth, we see real promise in research that more comprehensively examines alternative conceptualizations of OA. In particular, we recommend that future researchers take a temporally sensitive perspective, capturing differing combinations of exploitation and exploration depending upon the specifics of the organization’s environment and strategies. The literature on dynamic capabilities might provide a good starting point. Teece et al. (1997) discuss how capabilities and routines might enable the organization to dynamically integrate, build, and reconfigure their resources in rapidly changing environments. Thus, a dynamic capability perspective suggests that OA is not necessarily concerned with simultaneously pursuing exploitation and exploration to their maximum per se, but rather involves a dynamic balance that stems from purposefully steering and prioritizing each dimension to its inherent optimum as conditions demand. Because new opportunities (and threats) are constantly created by the organization’s internal and external dynamics, an organization might constantly attempt to balance exploitation and exploration, but may never achieve a lasting balance. Fifth, it intuitively makes sense that an ambidextrous organization should enjoy a certain degree of prestige and status, which may entice other organizations to form ties with it. Thus, while our model and propositions focused on the effects of interfirm ties on OA, OA may, in turn, influence the organization’s interfirm ties. We did not consider © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License 618 619 such potential feedback loops given our focus and for reasons for parsimony. As such, another fruitful research area may involve the complex reciprocal and coevolutionary linkages between OA and its antecedents. Finally, our discussion, using specific variables from the proposed model (Figure 2), focused on either main or two-way interactive effects on OA and OA’s relationship to performance. We also believe that additional insights can be gained by exploring configurations, specifically three-way interactions among antecedents in our model. Such an expectation is consistent with some who have argued that because exploitation and exploration require fundamentally different organizational structures, strategies, and contexts, the pursuance of OA might require hosting multiple elements (Benner and Tushman, 2003; Floyd and Lane, 2000; Levinthal and March, 1993; March, 1991). Similarly, we expect a multivariate influence among complexity, dynamism, and OA in predicting organizational performance. The joint presence of high dynamism and complexity gives rise to ‘dynamically competitive environments’ ( Jansen et al., 2005) or ‘hypercompetition’ (D’Aveni, 1994) where competition is intense in both factor and product markets. Hypercompetition characteristically poses intense demands on organizations to actively interpret and seize a changing list of opportunities and threats that defy thorough understanding (Floyd and Lane, 2000). Thus, a single focus under hypercompetition on either exploitation or exploration might often lead to deteriorating performance because bases for competitive advantage, industry structure, and product performance standards are generally short-lived or in a constant state of flux. Contributions This paper makes two distinct contributions to research. First, we suggested that differentiating the various input–process–output elements associated with this line of inquiry can help invigorate the OA concept by both substantiating and extending its conceptual foundations. To that end, we reviewed the literature and surfaced underlying definitions including structural, behavioural, and what we labelled as realized. Then using the input–process–output framework in Figure 1, we offered a conceptualization of realized OA, separating it from structural and behavioural ones. We suggested that whereas exploitative and exploratory attainments explain what OA consists of, structural and behavioural ambidexterity refer to an organization’s orientations and properties that might help it attain OA. Accordingly, we proposed that OA should be understood as the synchronous attainment of exploitation and exploration. Second, while OA has traditionally been studied from a single perspective using individual variables, and because a model that integrates prior findings on the various variables associated with OA has been lacking, we advocated that a multilevel model may encourage a more complete theorizing and understanding. Reflecting a complexity of factors that might potentially impact OA, we advanced a mode that suggests that OA is determined at the organization, interfirm, and contextual levels and that these levels can mutually interact to shape OA. By so doing, our model is potentially better specified compared to alternative models that could have been developed from a purely organization, interfirm, or contextual perspective because it also includes cross-level predictions that are important to OA, but that would have been omitted otherwise. Indeed, directly © Blackwell Publishing Ltd 2009 14676486, 2009, 4, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2009.00828.x by University Of Nottingham, Wiley Online Library on [31/07/2023]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License Organizational Ambidexterity Z. Simsek addressing the call in Raisch and Birkinshaw (2008), we have shown that propositions on how different antecedents interact and complement one another in explaining OA are not only possible, but also that our theory is impoverished without an examination of such influences. We have also suggested that the attainment of OA is not necessarily associated with higher performance and emphasized that the role of environmental uncertainty plays in this association. Taken together, our multilevel model thus helps to pave the way for the development of OA research and theory that are cumulative and integrative. CONCLUSIONS The challenge of OA is a crucial one for managers and scholars. However, even as research accumulates, OA still remains an undertheorized, underconceptualized, and, therefore, poorly understood phenomenon. Even though we here have drawn upon theories from various disciplines and traditions to integrate and extend current understanding about OA, much remains to be understood. Thus, further dialogue on OA promises to be interesting and valuable for both descriptive and normative theory. ACKNOWLEDGMENTS We would like to thank the editor, Colin Hales, and three anonymous reviewers, who helped make the paper better as a result of the revision process. Any errors remain our own. NOTES [1] We are grateful to a reviewer for this suggestion, which played a key role in this paper’s conceptual development. [2] We identified these definitions by searching several databases, including ‘Web of Science’, ‘ABI/Inform Global’, ‘Academic OneFile’, and ‘Google scholar’, using key words ‘organizational ambidexterity’, ‘ambidextrous organizations’, ‘firm ambidexterity’, and ‘ambidextrous firms’, as well as by examining papers cited in these sources. Thus, while we do not make the claim that this is a complete review, we were convinced that Table I had no systematic omissions or biases. [3] We appreciate this observation from an anonymous reviewer. [4] Because the literature on multilevel theories and phenomena includes several research streams (e.g. Hitt et al., 2007; Klein et al., 1994), a clarification is in order as to our usage of this term. Consistent with Hitt et al. (2007), we loosely use ‘multilevel’ to highlight two aspects of our model: (a) there exists multilevel nesting arrangement between levels and hence, variables in our model – that is, organizations are nested in interfirm networks, which are themselves nested in multiple environments; and (b) OA is the result of direct and ‘cross-level’ (Rousseau, 1985) influences emanating from the firm-, interfirm- and environmental-level. 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