Balancing Exploration and Exploitation in a Declining Industry: Antecedents to Firm Adaptation Strategy and Performance

This paper utilizes the theoretical framework of Raisch and Birkinshaw (2008: 381) to investigate the performance implications of three strategic adaptation approaches (exploitation, exploration, and organizational ambidexterity) in 94 small firms supplying tools and materials to the U.S. - based furniture industry. We measured four organizational antecedents to strategic adaptation as well as the performance outcomes associated with adaptation choice. Results demonstrate that organizational deftness, group potency, elements of communication and cooperation within the firm, and low centralization were significantly related to organizational ambidexterity, and that ambidexterity was positively related to revenue and profit growth. The implications focus on steps that organizational leaders can take to improve the ambidextrous posture of their organizations