Msc Strategic Management
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Acknowledgements I would like to thank Raymond van Wick, Bert Flier, and Justine Jansen for their inspirational lectures and papers forming the basis for my thesis and new found interests; Raymond van Will and Mochala Chippers for thoughtful discussion and feedback during the process of writing this thesis; the managers responding to my river for enabling thesis testing; my parents, sister, and brother for their enduring and limitless support and patience; and XX for her support, love, and understanding.
Your valuable contributions enabled the writing of this paper. XX, March 2009 Marten van Brussels Designing ambidexterity Social Capital and Ambidexterity 10 Cognitive social capital 11 Shared culture and systems Shared vision 12 Relational social capital 13 Trust Tie strength 14 Ambidexterity and Unit Performance
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It provides the organization the ability to be aligned with and adaptable to its environment. The ambidextrous organizational form builds on internally inconsistent structures and cultures, allowing exploratory and exploitative units to optimally configure themselves around specific task-environment requirements. Exploratory units search for new knowledge and skills for the development of radical innovations and are characterized by loose cultures.
Exploitative units build on and extend existing knowledge and skills for making incremental changes and fair well with tight cultures. Thus, to achieve ambidexterity organizations have to integrate the contradictory forces of exploration and exploitation and manage the internal tensions hat these forces bring along. However, it is strategic integration which remains to be a complex issue. The mechanisms for integration need to be able to access and integrate knowledge across relatively autonomous units.
Till date, formal integration mechanisms have received ample attention, while organizational social capital was largely ignored. Cognitive and relational social capital are found to be essential determinants for the transfer of knowledge between units within the organization and thus for their integration. Therefore, this study explores how cognitive social UAPITA, represented by shared culture and systems and shared vision, provides the needed meaning and understanding for business units in a context of contradiction which is apparent in the ambidextrous organizational form.
In addition, the facets of relational social capital, represented by trust and strong ties, are explored as enablers to bringing units focusing on either exploratory or exploitative activities together. In total 52 autonomous business units, from three globally diversified electronics and electrical equipment companies, participated with the research through surveys. These business units are responsible for either a specific market segment or product group, ranging from more traditional businesses to newer businesses.
They provided insight into their achievement of ambidexterity, performance, the extent of mutual meaning and understanding with other units, and the content of their relations with other units. The results concerning the four separated factors used to measure cognitive and relational social capital appear to be influenced by invisible multimillionaires. However, these factors still explain to considerable extent the achievement of business unit ambidexterity and reference.
Concerning cognitive social capital, a shared culture and systems do not appear to influence the achievement of ambidexterity, while a shared vision among business units strongly supports business unit ambidexterity and to considerable extent performance. Concerning relational social capital, trust between business units seems to contribute to ambidexterity, but a shared vision is an important contributor to this relationship. Trust also positively influences unit performance.
Strong ties do not seem to influence the simultaneous pursuit for exploratory and exploitative innovation. If at all, the relation would have been negative. Before strong ties would benefit ambidexterity, these ties need to be complemented by a certain amount of trust. In addition, strong ties do not support unit performance. The findings indicate that a combination of shared culture and systems and shared vision into a single measure of cognitive social capital does explain business unit ambidexterity and to considerable extent unit performance.
The sharing of a vision amongst separated business units appears to reduce the negative effects of resistance to change and adaptability following from a shared culture and systems. By combining shared vision and shared culture and systems it seems that a more balanced understanding or context is created in which units accept the simultaneous pursuit of exploration and exploitation. The combination also positively impacts performance. A combination of trust and strong ties into a single measure of relational social capital does explain unit performance, and to some extent ambidexterity.
It appears that trusting relations positively mediate the negative relation between strong ties and the search for novel ideas. While trust leads to the exchange and combination of rich resources, the implementation of the consequent novel insights and combinations is benefited by strong ties. The achievement of business unit ambidexterity does positively influence unit performance. However, ambidexterity does not seem to mediate the relation between social capital and performance. Rather the relation between social capital and unit performance is a direct one.
Overall, social capital dimensions enable the integration of exploratory and exploitative activities, while ameliorating the subsequent internal tensions. In addition, the content of relations and extent of mutual understanding between business units influences unit performance. Hence, social capital is an important contributor to vital business unit outcomes. Top managers should therefore master the creation and exploitation of social capital. Interesting avenues for future literature are discussed.
Taken together, these understandings deliver new insights into how business units might achieve competitive advantages and increased performance and survival chances. 5 An organization's long-term survival depends on its ability to "engage in enough exploitation to ensure the organization's current viability and to engage into enough exploration to ensure future viability' (March, 1991: 105). Indeed, Rakish & Brainwash (2008) in their effort to merge the burgeoned literature on organizational ambidexterity conclude that successful firms are ambidextrous.
It provides the organization the ability to be aligned with and adaptable to their environment (Gibson & Brainwash, 2004), enables the organization to simultaneously pursue exploratory and exploitative innovations (Banner & Dustman, 2003), and gives it competitive advantage (Dustman & Reilly, 1996). To achieve organizational ambidexterity organizations have to unite the contradictory forces of exploration and exploitation and manage the internal tensions that these forces bring along.
While the benefits of organizational ambidexterity have been emphasized and important contributions providing insight in how to accomplish organizational ambidexterity have been made (e. G. Jansen, George, Van den Busch, & Belabored, AAA; Kittening & Dustman, 2007; smith & Dustman, 2005; He & Wong, 2004), empirical evidence explicating the factors underlying the process of achieving organizational ambidexterity is largely lacking (Reilly & Dustman, 2008; Jansen, et al, AAA). The ambidextrous organization thrives on internally inconsistent structures and cultures (Smith & Dustman, 2005).
Exploratory units search for new knowledge and skills for the development of radical innovations in order to meet the needs of emerging customers or markets, while exploitative units build on and extend existing knowledge and skills for making incremental changes to existing products and services to meet the needs of existing customers and markets (Banner & Dustman, 2003). This focus enables the units to optimally configure themselves around specific discontentment requirements (Lawrence & Lora's, 1967).
However, it is the strategic integration of these contradictory forces which leads organizational ambidexterity to become a dynamic capability for the organization (Reilly & Dustman, 2008). Since organizational ambidexterity appears to be such an important concept for organizations and difficult to achieve a lack in research on its antecedents is surprising. This paper focuses on the antecedents of ambidexterity at business unit level by taking on a social capital perspective.
The research on managing and integrating exploratory and exploitative activities has mainly focused on formal structures and incentives, largely ignoring the social structure that likely enables organizational ambidexterity (Cleanable & Dustman, 2007; Jansen, Van den Busch, & Belabored, 2006). By focusing on cognitive social capital and relational social capital, the two dimensions of social capital that provide closure within the organization (Van Wick, Jansen, & Less, 2008), the paper attempts to explain the integration of exploratory and exploitative activities.
The paper argues hat cognitive social capital, represented by shared culture and systems and shared vision, provides the needed meaning and understanding in the context of contradiction (Smith & Dustman, 2005; Inpatient & Shoal, 1998; Inept and Tsars, 2005; Van Wick, et al, 2008), which is apparent in the ambidextrous organizational form. The facets of relational social capital, represented by trust and strong ties, are seen as enablers to bringing units focusing on either exploratory or exploitative activities together (Van Wick, et al, 2008; Tsar, 2000).
Also, social capital stands central o the understanding of innovation (Inpatient & Shoal, 1998; Moran, 2005) and as such influences exploratory and exploitative innovation. In addition, Guppy, Smith & Shelley (2006) state that learning from exploratory and exploitative activities is more likely to occur at macro level (I. E. Team, unit, organizational, or interdenominational), than at micro level (I. E. The individual).
Thus, referring to the definition of social capital (Inept & Tsars, 2005), organizational learning is a resource which is embedded within, becomes available through, and can be derived from a network of relationships. Following this logic, organizational ambidexterity resides in the relationships between units, which are explained by social capital theory. By addressing the question how social capital can enable ambidexterity, the study attempts to bring a social perspective into the ambidexterity debate.
Research addressing this link is missing, while the two are seemingly related. By studying the relation between social capital, which has the ability to build competitive advantage (Inpatient & Shoal, 1998), and ambidexterity, which leads to long-run survival (Rakish & Brainwash, 2008), this paper contributes mainly to the strategic management and organizational literature. In the following sections theory and hypotheses will be presented. Ambidexterity and social capital will be explained, while the hypotheses and the research model linking the two are given.
Then, the methodology section will outline how the study tests these hypotheses within business units. The results section provides initial insight on the fulfillment of the hypotheses, while their implications will be outlined in the discussion and conclusion section. In addition, the paper proposes future avenues for inquiry. 7 Duncan (1976) introduced the term ambidexterity, in the organizational setting, arguing that long-term organizational success depends on switching organizational structures in sequence, depending on an organization's state of innovativeness.
When an organization finds itself in a phase of innovation it should adopt an organic structure. When the organization is ready to exploit the innovation a mechanistic structure is more appropriate. However, it was not until the seminal article of March (1991) on organizational learning that research on ambidexterity started burgeoning. March (1991) argued that organizations should "engage in enough exploitation to ensure the organization's current viability and engage in enough exploration to ensure future viability' (March, 1991: 105, italics added).
A focus on exploitation at the expense of exploration is likely to lead to short-term success, but in the long-term may lead to competency traps and inertia. A focus on exploration at the expense of exploitation might lead to innovate ideas, but would leave the organization without the ability to reap the benefits. Dustman & Reilly (1996) showed that organizations are able to combine exploratory and exploitative activities.
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