Balancing Exploration and Exploitation Through Structural Design: The Isolation of Subgroups and Organizational Learning

The classic trade-off between exploration and exploitation in organizational learning has attracted vigorous attention by researchers over the last two decades. Despite this attention, however, the question of how firms can better maintain the balance of exploration and exploitation remains unresolv...

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Bibliographic Details
Published inOrganization science (Providence, R.I.) Vol. 21; no. 3; pp. 625 - 642
Main Authors Fang, Christina, Lee, Jeho, Schilling, Melissa A.
Format Journal Article
LanguageEnglish
Published Linthicum INFORMS 01.05.2010
Institute for Operations Research and the Management Sciences
Subjects
Analysis
Connectivity
diffusion
Diffusion processes
Equilibrium
Exploitation
Exploration
exploration and exploitation
Group dynamics
interpersonal networks
Learning
Learning rate
Methods
Modeling
Modelling
Organizational behaviour
Organizational learning
Organizational structure
Outcomes of education
R&D
Research & development
Simulations
Social interaction
Structural analysis
Structural design
Studies
Technological innovation
Turbulence
United States
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Summary:The classic trade-off between exploration and exploitation in organizational learning has attracted vigorous attention by researchers over the last two decades. Despite this attention, however, the question of how firms can better maintain the balance of exploration and exploitation remains unresolved. Drawing on a wide range of research on population and organization structure, we argue that an organization divided into semi-isolated subgroups may help strike this balance. We simulate such an organization, systematically varying the interaction pattern between individuals to explore how the degree of subgroup isolation and intergroup connectivity influences organizational learning. We also test this model with a range of contingency variables highlighted in the management research. We find that moderate levels of cross-group linking lead to the highest equilibrium performance by enabling superior ideas to diffuse across groups without reducing organizational diversity too quickly. This finding is remarkably resilient to a wide range of variance in factors such as problem complexity, environmental dynamism, and personnel turnover.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
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ISSN:1047-7039
1526-5455
DOI:10.1287/orsc.1090.0468