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Lavie & Rosenkopf (2006) "Balancing exploration and exploitation in alliance formation

36 important questions on Lavie & Rosenkopf (2006) "Balancing exploration and exploitation in alliance formation

What is defined as exploitation alliances?

knowledge-leveraging marketing alliances

Where does attribute exploration refer to?

To a firm's forming alliances with partners whose organizational attributes considerably differn form those of its prior partners

What question does the function domain answer?

What value chain function does the alliance serve?

What question does the structure domain answer?

Whom does the firm partner with?

What question does the attribute domain answer?

To what extent does the partner differ from prior partners?

How are recurrent alliances between firms considered (structure domain)

As a form of exploitation

What is considered exploratory behavior in the attribute domain?

A deviation from systematic pattern of alliance formation with partners that share certain organizational attributes.

What is considered exploration behavior in the attribute domain?

When a firm persistently forms new alliances with new partners that are similar to its prior parnters with respect to attributes such as size and industry focus and it can apply established heuristics and effective governance mechanisms for assimilating external knowledge

How can alliances serve?

As vehicles allowing a firm to explore external opportunities while maintaining an integrated internal organization. Nonetheless, empirical research indicates that exploitation crowds out exploration

What is the role of exploration and exploitation according to the organizational learning perspective?

In the organizational learning perspective, inertia impels firms toward exploitation, whereas search activities, backed by absorptive capacity, drive exploration.

What are the pressures for exploration? Where do they derive from?

From organizational inertia which is evident when the speed of reorganization is much lower than the rate at which environmental conditions change

Where does inertia result from?

From internal forces as well as external forces.

In which way may inertia independently inhibit exploration in one or more domains of alliance formation?

In the function domain, firms that commit to existing technologies are less likely to explore new technologies through their alliances.
Inertia may reduce structure exploration by promoting partner-selection routines that impel firms to enhance the predictability, stability, and reliability of their alliances.
Even when partner selection routines fail to yield relevant partners, firms may still leverage established routines to identify partners that match a certain profile. In so doing, they specialize and become efficient in managing alliances, thus reinforcing attribute exploitation.

What does absorptive capacity facilitate?

Furnishing the mechanism via which firms can identify the need for and direction of exploratory activities.

What does absorptive capacity do?

Help firms identify emerging opportunities and evaluate their prospects, thus enhancing exploration

How does absorptive capacity enhance exploration?

Absorpitve capacity motivates the search for new technologies and the assimilation of external knowledge, thus facilitating the formation of knowledge-generating R&D alliances
Absorptive capacity encourages the pursuit and assimilation of external knowledge and thus motivates firms to identify new partners that can furnish such knowledge
Absorptive capacity reinforces structure exploration since in enhances receptivity to external knowledge and enables firms to apply and internalize the knowledge learned from new partners

Where does the challenge to balance in the function, structure and attribute domain derive from?

From the fundamentally conflicting domain-specific pressures imposed by inertia and absorptive capacity

Where can the tendency to underscore either exploration or exploitation within domains be ascribed to?

To path dependencies

What are path dependencies?

A firm's previous investements and its repertoire of routines (its 'history') constrain its future behavior

Why does path dependence emerge in exploitation?

Because inertia facilitates routine-based experiential learning and a firm's routines represent patterns of behavior based on past experience.

What are the routines that become part of firm's repertoires?

Those that have been previously shown to produce favorable outcomes

Why may these outcomes in turn lead to path dependence?

Because the frequency of employing a routine increases its efficiency and the likelihood of desirable outcomes, which in turn further reinforce its application

Why is absorptive capacity path dependent as well?

Since the ability to explore new opportunities and evaluate, understand, and acquire new knowledge, depends on firms' past experience in relevant knowledge domains

Why is balancing within domains organizationally challenging and does in entail natural behavioral tendencies and cognitive constraints?

Given the conflicting pressures imposed by inertia and absorptive capacity

In turn, where do the firms that simultaneously exploit across domains limit their search activities and constrain potential technical and market opportunities by?

By focusing on the refinement of existing knowledge, fostering only established firm ties, and restraining network heterogeneity, thus limiting long-term prospects.

So why is balancing exploration-exploitation across domains possible?

Inertia and ACAP within domains may not necessarily conflict across domains.
Firms may explore in one domain by exploiting in another to specialize in either exploration or exploitation within each domain.
It avoids unnecessary levels of uncertainty and risk when firms explore at the same time across the domains.
It may limit the long-term prospect when firms exploit at the same time across the domains which hinder their search activities and constrain potential technical and market opportunities.

What does the transition between exploration and exploitation require?

That firms have traditionally followed established routines to enhance their absorptive capacity, while firms that have developed expertise in identifying external opportunities and capitalizing on new knowledge must regulate some organizational procedures that improve efficiency

How do firms balance exploration and exploitation in the context of alliance formation over time?

By gradually adjusting their tendencies to explore or exploit within each domain

What is a possible path?

A gradual shift toward exploitation as firms conclude early R&D efforts and proceed to commercialization and production

In which way may firms intertemporal balancing exploration-exploitation within and across domains?

By gradually shifting from one learning activity to the other within certain domains.

Small changes in firms’ perception of the environment improve constant attention and adaption over time, which may lead to temporal efficiency.
Slow incremental changes may displace current development trajectories, which enable firms to avoid competency traps.

What happens when there is a shift between exploration and exploitation within a certain domain lead to a disequilibrium?

Firms tend to compensate by shifting exploration in one domain with exploitation in another

Why do firms tend to compensate?

This help firms to protect its investments in the development of organizational routines and maintain ACAP.
Firms may switch their inertial forces and ACAP in one domain to another due to the fact that corresponding investments and routines are somewhat fungible across domains.

What is the role of inertia and ACAP?

Inertia and ACAP constrain firm’s learning behavior in exploration and exploitation about the nature of their alliances, choice of partners over time and across domains.

What is the role of path dependencies?

Path dependencies limit firms’ abilities to balance inertia and absorptive capacity within domains, so it needs continuously adaption to defeat path dependencies.

What is second-order exploitation?

Firms leverage their experience to enhance the efficiency of either exploration and exploitation activities

What are the limitations to this study?

Intra-organizational learning
Time intervals
Industry context
Inertia and absorptive capacity - lack of proper measurement
Lack of link with firm performance

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