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Journal of Management
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Untangling the Effects of Overexploration and Overexploitation on Organizational Performance: The Moderating Role of Environmental Dynamism{dagger}

Heli Wang

Department of MGTO, School of Management, Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong, mnheli{at}ust.hk

Jiatao Li

Department of MGTO, School of Management, Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong, mnjtli{at}ust.hk

Because a firm's optimal knowledge search behavior is determined by unique firm and industry conditions, organizational performance should be contingent on the degree to which a firm's actual level of knowledge search deviates from the optimal level. It is thus hypothesized that deviation from the optimal search, in the form of either overexploitation or overexploration, is detrimental to organizational performance. Furthermore, the negative effect of search deviation on organizational performance varies with environmental dynamism; that is, overexploitation is expected to become more harmful, whereas overexploration becomes less so with an increase in environmental dynamism. The empirical analyses yield results consistent with these arguments. Implications for research and practice are correspondingly discussed.

Key Words: overexploitation/overexploration • consistency in search • environmental dynamism • organizational performance

This version was published on October 1, 2008

Journal of Management, Vol. 34, No. 5, 925-951 (2008)
DOI: 10.1177/0149206308321547
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