Innovation Ambidexterity: addressing Gaps in Theoretical and Empirical Interpretations

Authors

OLGA FERNHOLZ  Horizon Doctoral Training Centre Horizon Digital Economy Research Institute University of Nottingham Innovation Park Nottingham, United Kingdom  psxof@nottingham.ac.ukOlga Fernholz is a PhD student at Horizon Doctoral Training Centre for the Digital Economy at the University of Nottingham, United Kingdom.  She has an MSc in Science, Technology and Society with a major in Innovation Management and Research Policy from Lund University, Sweden, and an MA in Germanic Languages, Linguistics and World Literature from Perm State University, Russia.  Her current PhD research deals with technological and organisational change in technology and management intensive firms.

 

 

 

Dr MATHEW HUGHES  Durham University Business School Durham, United Kingdom  mat.hughes@durham.ac.ukHughes is a Reader in Entrepreneurial Management and Director of the PhD Programme at Durham University Business School, and former Associate Professor of Entrepreneurship and Innovation at Nottingham University Business School.  Mathew has considerable teaching and research experience and specialises in the themes of entrepreneurial management, innovation, and corporate entrepreneurship.  His research is widely published in such journals as Strategic Entrepreneurship JournalBritish Journal of ManagementJournal of Business ResearchJournal of International Marketing and Long Range Planning.  Mathew serves on the editorial boards of the Journal of Management Studies and the International Journal of Entrepreneurial Venturing.

 

 

ROBERT DINGWALL  Dingwall Enterprises Consultant to Horizon Digital Economy Research Institute University of Nottingham Innovation Park Nottingham, United Kingdom  robert.dingwal@ntlworld.comROBERT DINGWALL  Dingwall Enterprises Consultant to Horizon Digital Economy Research Institute University of Nottingham Innovation Park Nottingham, United Kingdom  robert.dingwal@ntlworld.comProfessor Robert Dingwall is a consulting sociologist and Director of Dingwall Enterprises.  Robert is Emeritus Professor at the University of Nottingham, where he was the founding Director of the Institute for Science and Society.  Among other clients, he is a consultant to the RCUK Horizon Digital Economy Hub.  He has extensive research and publication experience in the social scientific study of health care, legal services, science and technology.

 

 

Innovation Ambidexterity

 

Given the fast-paced pervasive change induced by modern digital technologies managers of any technology-based firm (TBF) face the same crucial question: How to tap the value of today’s capabilities and prepare for tomorrow’s cutting edge innovations?  Innovation ambidexterity, conceptualised as the organisation’s capability to exploit old certainties while simultaneously exploring new opportunities, has often been argued to be the best way for firms to organise to ensure continuous technological innovation, organizational learning and, ultimately, long-term performance and growth (Benner and Tushman 2002, 2003, March 1991, Tushman and O’Reilly 1996).  More descriptive empirical research advocates the presence of exploration and exploitation, and the optimal balance between them as crucial elements of a corporate strategy for firm longevity (Birkinshaw and Gibson 2004, Burgelman and Grove 2007, O’Reilly III et al 2009, O’Reilly III and Tushman 2004, O’Reilly III and Tushman 2011).  However, the popularity of the terms exploration, exploitation and ambidexterity in managerial literature and practice may be outpacing their conceptual development.  Theoretical scrutiny of the concept of innovation ambidexterity seems to provide more questions than answers on the nature of the proposed balance between exploration and exploitation activities as it struggles to disentangle the two in a variety of application contexts.

 

Existing Issues of Innovation Ambidexterity

 

Whereas exploration and exploitation are seen as inherently conflicting at a single organisational level, and extensive research is dedicated to exploration-exploitation trade-offs (Leonard-Barton 1992, Levinthal and March 1993, March 1991), there is considerably less understanding of potential complementarities and spill-over effects between exploration and exploitation over longer periods of time in either a single context or across units (Katila and Ahuja 2002).  Reconceptualising ambidexterity as a behavioural rather than structural capability (Gibson and Birkinshaw 2004, McCarthy and Gordon 2011) or raising the level of analysis to differentiated organisational structures (Birkinshaw and Gibson 2004, Kauppila 2010) or, to the broader industrial landscape (Chesbrough 2003, Lavie and Rosenkopf 2006, Lavie et al. 2010, Powell et al. 1996), allows theorisation of exploitation and exploration as orthogonal and non-competing (Gupta et al. 2006), but leaves us with the challenge of distinguishing between the two, which in turn complicates the analysis of the interactive ambidexterity effect.  Switching or combining levels of analysis necessary for a holistic and dynamic study of the firm blurs the notions: an individual employee might consider their work inventive and explorative, but it may be advancing the firm along the existing trajectory, therefore, amount to exploitation.  On the other hand, various exploitative efforts of individuals might accumulate into qualitatively new recombinations, i.e. result in exploration at the level of the firm.

 

Academic debate on the value of the ambidexterity concept is polarised between those who claim its analytical weakness, point at inconsistent empirical evidence and therefore view it at best as a convenient metaphor (DRUID Society Conference Debates 2012), and those who strive to ground its principles (Jansen et al 2006, Lin et al 2012), reconcile  definition and conceptual tensions (Gupta et al 2006, Raisch et al 2009, Smith and Tushman 2005), generalise across multiple contexts of application (Luo and Rui 2009, Siggelkow and Rivkin 2006), and systematise various literature streams (Lavie et al 2010, Nosella et al 2012, Raisch and Birkinshaw 2008) to increase the theory’s theoretical robustness and empirical relevance.  Importantly, both parties unanimously emphasise, that if we are to use theory of innovation ambidexterity as an analytical tool rather than a rhetoric device and make constructive contributions to managerial practice, we need to advance operationalisation of the theory’s conceptual apparatus, test its premises, scrutinise its assumptions, and define scope of its application.

Research Goals and Methodology

 

The paper presents initial findings of the PhD research in progress that aims to assess innovation ambidexterity theory by adopting a dynamic multi-dimensional perspective on innovation processes and examine mechanisms, processes, and routines that are directly involved in balancing ambidexterity tensions across multiple levels of a technology and management intensive firm.  The goal of this paper is to identify points of contradiction between normative and positive interpretations of innovation ambidexterity.

 

The study represents a case study research of a major technology intensive company in the microprocessor IP manufacturing and licensing industry.  For anonymity, the remainder of the text will refer to the company as ‘Genesis’.  The case draws on qualitative data consisting of semi-structured interviews with top executives, senior and middle managers, as well as industry presentations and the firm’s documents.  The objective of data analysis was to identify organisational routines and managerial decisions associated with exploitation and exploration, organisational structures that support these, and determine the content of definitions attributed to innovation activities within the firm.

 

The study addresses the following questions: (1) what are the organisational processes, structures, and managerial decisions associated with exploration, exploitation, and innovation ambidexterity in the chosen empirical setting? (2) what are the contexts in which these phenomena operate? (3) how do exploration-exploitation mechanisms and definitions vary across these contexts? and (4) how does the obtained empirical evidence relate to the extant conceptualisation of exploitation, exploration and innovation ambidexterity?

 

Findings and Discussion

 

Genesis is a world-leading semiconductor intellectual property designer and licensor supplying low-power high-performance microprocessor designs to a network of over 2500 microprocessor and original equipment manufacturers.  It supports and collaborates with its connected community of over 1000 partner firms.  Genesis employs a licensing and royalties business model: it is a fabless semiconductor company focused entirely on the production of intellectual property (IP), which is sold via a number of flexible licensing models to its customers.

 

In its online value and culture statement, Genesis explicitly declares innovation to be one of its main values.  Interviews with top executives and senior managers showed that the terms ‘ambidexterity’, ‘ambidextrous organisation’, ‘exploration’ and ‘exploitation’ have become part of the managerial speak in application to the way of thinking about innovation in the company.  The organisational capability associated with ambidexterity incorporates three “layers” (dimensions): temporal, technological and a business model layer.  Because these dimensions embrace a number of organisational functions and levels, ambidexterity is understood and enacted more as an organisational rather than individual capability.

 

The company is subdivided into two distinct structures: Genesis A and Genesis B.  The former is Genesis’ core microprocessor business charged with evolving current products and delivering financial results, whereas the latter is a considerably smaller body vested with experimenting “completely outside the current business model” “in maybe completely different cultures, systems, processes, etc.” [having] “the freedom to develop into a completely different framework” (Interviewee, senior executive).  An important strategic function of Genesis B is to scan the industrial horizon with the aim of setting foot in radically new businesses via mergers, acquisitions, and investment activities.  To date, no tangible product output has been reported as a result of Genesis B work.

 

As proposed in the theoretical part of the research, structures and processes of organisational ambidexterity can receive various interpretations depending on the level of analysis and the standpoint from which the level is viewed.  This is demonstrated in the context of Genesis.  On the macro organisational level, throughout its history, Genesis has been exploiting an IP licensing business model and strongly relying on the existing knowledge of system-on-a-chip and microprocessor hardware, which predominantly took Genesis along the evolutionary development trajectory.  Given the current widely reported focus on the efficiency of Genesis A business (Genesis Annual Report 2012), Genesis can be considered an evolutionary exploitative business both in terms of the underlying technology – making the microprocessor smaller, faster, more energy efficient, cheaper and in terms of the business model of “designing once and licensing many times” (Genesis Company Profile 2013).  However, given the value of innovation, it is not surprising that Genesis’ top managers emphasise exploring new business and technological opportunities for the future alongside efficiency, and actively establish organisational processes and structure that support both.  In this sense, they act ambidextrously and ambidexterity in Genesis as revealed both at the managerial as well as organisational level.  However, it is not clear at this stage, whether, and how, individual ambidexterity of managers translates into a more dynamic organisational capability to exploit and explore apart from the structural arrangements, Genesis A and Genesis B, discussed above.

 

At the level of organisational divisions, given the presence of Genesis A and Genesis B structures, the company’s organisational design resembles structural ambidexterity (see Figure 1).  The duality of functions and structures is in accordance with Genesis’ interpretation of ambidexterity and self-identification as an ambidextrous organisation.  Furthermore, viewed from the inside, the core Genesis A structure itself can be seen to include both exploration and exploitation.  Genesis’ five main product divisions are responsible for following the current roadmaps (exploitation), while Corporate R&D and Advanced Product Development (APD) divisions are responsible for advancing technological IP along the existing technological trajectories, but in the longer time scale, as well as expected to generated insights in potentially new fields of application or new technical capabilities (exploration).  In sum, explorative activities are inherent in both Genesis A (APD and corporate R&D) and the dedicated explorative Genesis B.  According to an interviewee, this is where “the boundaries tend to become fuzzy: [product divisions] would actually be working on designing an implementation of a microprocessor, whereas [APD] might be working on exploring new ways of creating part of the instruction set of a microprocessor which is not a product in its own right but it is maybe a technology ingredient.  Separate from there you’ve got your corporate R&D which is where you potentially start branching out into areas that are less closely coupled.  […]  It is vital to create future ingredient technologies

that will feed through into your products, and I always wanna say blue sky, but it’s not blue sky research” (Interviewee, senior executive).

 

Furthermore, from the partners’ perspective, Genesis is seen as a repository of IP, as their external R&D department, the complementary explorative part to their businesses.  Partners exploit system-on-a-chip designs developed by Genesis to manufacture a wide range of electronic products.

 

Lastly, given the complementarity of Genesis and the Connected Community partners, Genesis can be said to enact ambidextrous organisation at the level of a wider ecosystem, using the manufacturing, sales and marketing, service and support resources of the partners to jointly bring Genesis chip powered products to live.  An ecosystem approach has been repeatedly emphasised by Genesis and is credited for providing exceptional possibilities for recombining the diverse capabilities of the ecosystem participants.

 

The described levels and perspectives combined make it difficult to arrive at straightforward conclusions about Genesis’ organisational ambidexterity design.  Importantly, Genesis’ underlying technology base is vastly impacting the innovation strategy and ecosystem organisation.  The advancement of digital technologies in the post PC era characterised by mobility, on-line presence, blurring of the boundaries between product lines and connection into “the cloud” of devices and information presents Genesis with novel opportunities for capability development and recombination.  While some innovative devices require cutting-edge systems-on-a-chip, other innovations thrive on microprocessor technology developed a decade ago.  This has implication to the balance of Genesis’ exploitative and explorative innovation processes in individual product families.  Because of Genesis’ unique competence in designing the microprocessor core, which lies at heart of every electronic device regardless of its level of sophistication, the company can innovate equally successfully by advancing the technology proper, by experimenting with the existing technology in the new areas of application, or by developing new systems-on-a-chip for new applications.  This characteristic blurs the border between exploitation and exploration within Genesis, which calls on conceptualisation of exploitation and exploration in relation to the technology base in addition to the theorisation across organisational levels.

 

Figure 1:  Genesis Nested Ecosystem

Figure 1: Genesis Nested Ecosystem

 

Conclusions and Practical Implications

 

This paper focused on the discrepancy between the normative and the positive view on innovation ambidexterity, and discussed the problem of divergent understanding of exploration, exploitation and innovation ambidexterity in academic literature and actual managerial practice, which is detrimental for the theoretical robustness of the framework as well as problematic for business practitioners who often cannot rely on the vast but inconsistent body of research on innovation ambidexterity.  For ambidexterity theory to be a useful tool in managerial practice, further research needs to be done that clarifies the conceptual apparatus of the theory and validates its mechanisms.  The greatest potential for extending the presented research is in the analysis of the Genesis’ ecosystem, which illustrates the blurring contexts of exploitation and exploration activities, technological as well as business model innovations, and multiple-level mechanism and perspective on the optimal balance between them.

 

References

 

Genesis Company Profile and Annual Report (2012) are fictitious equivalents of actual information used.  Accessed online: 25.02.213.

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