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Exploration for Innovation : Capability-based Search Approaches in Established Firms

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The ability to continuously develop both incremental and radical innovations is a hallmark of successful companies. Incremental innovations are important to secure the short-term survival of the firm. Radical innovations are important because they enable the firm to stay competitive in the long run. Therefore, maintaining a balance between exploitation of existing capabilities for the development of incremental innovations and exploration for new knowledge for the development of radical innovations is paramount for firm success. However, in contrast to exploitation, returns from exploration are uncertain and remote in time. As a consequence, exploration activities are often crowded-out in favor of exploitative innovation projects. Although much is known about incremental product innovation, there is little insight how firms successfully explore for new knowledge for radical innovation, which is subject to analysis of this thesis.

Due to scarce practical insights into exploration, this thesis applies a qualitative, case-study based research approach. Based on responses from Ciba, Gore, Hilti, and Bühler, existing literature on exploration is extended by examining the relationship between exploration activities and exploration success. The case study analysis reveals that firms' exploration success depends on three parameters: exploration propensity, efficacy, and efficiency. Exploration propensity largely depends on the firm's overall corporate strategy and product strategies. To reduce uncertainty and ensure efficacy, firms' exploration approach entails stretching existing capabilities stemming from the core business and matching them with requirements of new domains. Finally, exploration efficiency is attained by ensuring dedicated organizational structures and by employing individuals with broad experience and a wide knowledge background.

The results challenge conventional beliefs that radical innovation is a result from searching and combining distant pieces of knowledge. Firms cannot afford to search randomly for new knowledge, but their exploration efforts must ultimately pay off. This research reveals that firms have found ways how to effectively reduce uncertainty during exploration by searching for distant yet related new knowledge.
   
type thesis (English)
   
keywords Exploration, Innovation, Search, New Business Development
   
university St. Gallen
evaluator Prof. Dr. O. Gassmann, Prof. Fritz Fahrni, PhD
publisher Harland Media (Lichtenberg)
date of appearance 2010
ISBN 978-3-938363-65-2
citation Zeschky, M. (2010). Exploration for Innovation: Capability-based Search Approaches in Established Firms, St. Gallen, Thesis. Lichtenberg: Harland Media. - ISBN 978-3-938363-65-2.