A stage-dependent model of resource utilization,strategic flexibility,and implications for performance over time: Empirical evidence from a transitional environment

It has long been recognized that there is a tradeoff between exploration and exploitation. How organizations utilize resources across time and space will affect firm survival and growth. In this paper, we examine resource utilization and performance implications over time in an environment undergoing fundamental institutional transformation. Based on a large archive of Chinese government data from 1988, 1992, and 1996, the study finds that (1) the impact of resource utilization is contingent on the degree to which different resources are committed to factors of production, (2) the impact is curvilinear and only valid within an “optimal” range, and (3) the performance implications change over time. As firms enter later stages of the transitional process, efficiency becomes less important as they shift their strategic focus from exploitation to exploration, which requires more flexibility. These findings have significant bearing on the issue of upgrading technological competitiveness in China as the country becomes increasingly integrated in the global economy. Such insights may also have implications for other emerging economies in Asia.

Justin TanEmail:

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Justin Tan   (PhD, Virginia Tech) is professor of management and the Newmont Endowed Chair in Business Strategy in the Schulich School of Business at York University in Canada. He is also a Distinguished Visiting Professor in the Guanghua School of Management at Peking University in China. He received the US Fulbright Distinguished Professorship and served in China from 2005 to 2006. Yong Zeng   (PhD, Tsinghua University) is professor of finance in the College of Economics and Management at the University of Electronic Science and Technology in China. His research interests include financial engineering, corporate finance and capital market, economic forecasting and strategic decisions. His works have been published in major academic journals.