The Good and Bad of Ambidexterity: In Which Domains Should Firms Be Ambidextrous or Not to Foster Innovativeness?

Abstract

Because it is difficult and costly for firms to practice exploration and exploitation simultaneously in their new product development, managers need to know when investing in ambidexterity is beneficial for their firm’s innovativeness and when it is not. To date, research has remained undecided about the performance implications of striving for the joint implementation of exploration and exploitation. To address this persistent debate, the current study develops a new conceptualization that distinguishes two forms of ambidexterity, with contrasting effects on innovativeness. Drawing on dynamic capabilities theory, this study proposes that market-based ambidexterity benefits companies’ innovativeness, whereas product-based ambidexterity harms it. The empirical results, obtained from longitudinal data gathered from 229 executives in multiple industries, confirm these theorized effects of the two forms of ambidexterity on product program innovativeness, which in turn increases firm performance. These findings help explain the varying effects of ambidexterity in prior research and offer important managerial and decision-making implications.