Location is everything: Explorative and exploitative learning, non-scale free resources, and firm performance of German companies

Abstract

AbstractA firm’s aptitude to acquire new knowledge and simultaneously exploit existing capabilities is suggested to improve firm performance. Although resource endowment is important to achieve a balance between exploration and exploitation, the role of a firm’s non-scale free resources on the exploration‒exploitation and performance linkage has gained little attention. We transfer and apply the first longitudinal test of the exploration–exploitation and firm performance linkage in a German sample. We argue and replicate an inverted U-shaped relationship between relative exploration and firm performance. Further, we hypothesize the competition for and the access to non-scale free resources to moderate this relationship. While we do not find support for the latter, we reveal that the competition for non-scale free resources weakens the relationship between relative exploration and firm performance. We contribute to the exploration–exploitation literature by testing the proposed relationship between exploration–exploitation and firm performance in a different geographical setting, advancing the generalizability of this relationship. In order to do so, we make the commonly accepted measurement approach of Uotila et al. (Strateg Manag J 30:221–231. 10.1002/smj.738, 2009) applicable to German-speaking countries by translating, refining, and extending the dictionary proposed by March (1991) with more contemporary words. Moreover, we contribute by investigating the competition for non-scale free resources between companies in the context of exploration–exploitation. We thereby reveal lower competition for non-scale free resources as a success factor for improving the relationship between a firm’s relative exploration orientation and its performance. This seems particularly important since Germany’s economy has been confronted with a decline in its innovative strength and an eminent lack of skilled workforce in recent years.