Exploration and Firm Performance: The Moderating Impact of Competitive Strategy
| Date | 01 July 2017 |
| Author | Hai Guo,Wei Sun,Zhongfeng Su |
| Published date | 01 July 2017 |
| DOI | http://doi.org/10.1111/1467-8551.12218 |
British Journal of Management, Vol. 28, 357–371 (2017)
DOI: 10.1111/1467-8551.12218
Exploration and Firm Performance: The
Moderating Impact of Competitive Strategy
Zhongfeng Su, Hai Guo1and Wei Sun
School of Management, Xi’an Jiaotong University, Xi’an 710049, P.R. China, and 1School of Business, Renmin
University of China, Beijing 100872, P.R. China
Corresponding author email: guohai@rbs.ruc.edu.cn
In this study we examine the moderating eect of competitive strategy (including dif-
ferentiation and cost-leadership strategies) on the relationship between exploration and
firm performance. We find that the moderating eect of dierentiation strategy is posi-
tive while that of cost-leadership strategy is negative. And, these moderating eects are
stronger in a highly competitive context. This study oers an explanation for previous
mixed findings on the linkage of exploration to firm performance and enriches the disci-
pline’s knowledge regarding the performance implications of exploration. Moreover, we
respond directly to the appeal in researchon competitive strategy to clarify the role played
by competitive strategy in profiting fromexploration.
Introduction
Exploration reflects a learning mechanism towards
new knowledge that departs from existing techno-
logical trajectories and market segments (March,
1991). It emphasizes experimenting with new al-
ternatives and developing new ways to do business
through search, discovery, risk-taking, innovation
and so on (Gupta, Smith and Shalley, 2006; Voss,
Sirdeshmukh and Voss, 2008). Exploration has
been argued to have a positive relationship with
firm performance, yet previous studies report
inconsistent findings on this relationship that
include positive, non-significant and negative
results (e.g. Bierly and Daly, 2007; He and Wong,
2004; Jansen, Van Den Bosch and Volberda,
2006). Accordingly, it is imperative to understand
how a firm can profit from exploration (Bauer and
Leker, 2013; Gupta, Smith and Shalley, 2006).
A plausible explanation forthese mixed findings
is that, while exploration is important for a firm,
it cannot automatically lead to superior perfor-
mance; instead, to profit from explorationthe firm
This study is supported by the National Natural Science
Foundation of China (71472087, 71202107, 71472185).
should adopt an appropriatestrategy to harness its
potential (Hitt et al., 2011; Ketchen, Ireland and
Snow, 2007). The implication of this explanation
is that the linkage of exploration to firm perfor-
mance is contingent on a firm’s strategy. Therefore,
it is not fruitful to simply examine the exploration–
performance linkage; rather, we must investigate
what strategy can complement exploration in ac-
complishing its performance eects. However, nei-
ther the research on exploration nor that on com-
petitive strategy has examined this issue, leaving a
research gap.
This study addresses the gap. Specifically, as
two fundamental types of competitive strategy
(Porter, 1985), dierentiation and cost-leadership
strategies may aect the relationship between
exploration and firm performance. In addition,
both strategies have been widely highlighted in
research and practice, lending strong value to
the present examination (Li and Li, 2008; Zott
and Amit, 2008). This study therefore focuses on
dierentiation and cost-leadership strategies and
investigates their moderating eects on the link-
age between exploration and firm performance.
Furthermore, successfully taking advantage of
exploration is particularly helpful for coping with
© 2017 British Academy of Management. Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4
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