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Knowing when to leap: Transitioning between exploitative and explorative R&D
Author(s) -
Mudambi Ram,
Swift Tim
Publication year - 2014
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.2097
Subject(s) - extant taxon , perspective (graphical) , investment (military) , exploratory analysis , function (biology) , economics , business , industrial organization , biology , computer science , evolutionary biology , political science , data science , artificial intelligence , politics , law
A common perspective is that consistent R&D investment facilitates innovation, while volatile spending implies myopic decision making. However, the benefits to exploiting extant competencies eventually erode, so firms must disrupt their R&D function and explore for new competitive advantage. We suggest that high‐performing firms recognize when extant competencies decline and increase exploratory R&D to develop new competencies at the appropriate time. We find that changes in R&D expenditure away from the firm's historic trend, in either direction, are indicative of transitions between exploitative and exploratory R&D and are associated with increased firm performance. Increases in R&D expenditure above the trend are associated with an increased likelihood of highly cited patents, suggesting that firms are making the leap between R&D ‐based exploitation and exploration . Copyright © 2013 John Wiley & Sons, Ltd.