Knowing when to leap: Transitioning between exploitative and explorative R&D |
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Authors: | Ram Mudambi Tim Swift |
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Institution: | 1. Department of Strategic Management, The Fox School of Business, Temple University, , Philadelphia, Pennsylvania, U.S.A.;2. Department of Management, St. Joseph's University, , Philadelphia, Pennsylvania, U.S.A. |
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Abstract: | A common perspective is that consistent R&D investment facilitates innovation, while volatile spending implies myopic decision making. However, the benefits to exploiting extant competencies eventually erode, so firms must disrupt their R&D function and explore for new competitive advantage. We suggest that high‐performing firms recognize when extant competencies decline and increase exploratory R&D to develop new competencies at the appropriate time. We find that changes in R&D expenditure away from the firm's historic trend, in either direction, are indicative of transitions between exploitative and exploratory R&D and are associated with increased firm performance. Increases in R&D expenditure above the trend are associated with an increased likelihood of highly cited patents, suggesting that firms are making the leap between R&D‐based exploitation and exploration. Copyright © 2013 John Wiley & Sons, Ltd. |
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Keywords: | R&D expenditure volatility proactive R&D management exploitation exploration punctuated equilibrium |
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