Exploratory and Exploitative Adaptation in Turbulent and Complex Landscapes

• DOI: http://doi.org/10.1111/emre.12140
• Date: 01 December 2018
• Published date: 01 December 2018
• Author: Juha Uotila

Exploratory and Exploitative Adaptation in

Turbulent and Complex Landscapes

JUHA UOTILA

Warwick Business School, The University of Warwick, Coventry, United Kingdom

Using a simulation of organizational adaptationin turbulent and complex landscapes, I examine how the optimal

balance between exploration and exploitation is influenced by the organization’s task environment. I find that,

contrary to conventional wisdom, increasing exploration relative to exploitation is not always the optimal response

to increased environmental turbulence orcomplexity. Turbulence is found to have a curvilinear effect on the optimal

share of exploratory versus exploitativeadaptation, with the relativeimportance of exploitation greatest at moderate

degrees of turbulence. While environmental complexity is found to have a generally positive effect on the optimal

share ofexploration, the effects of complexity and turbulence arefound to interact and, jointly, to increase the relative

importance of exploitative adaptation over exploratory adaptation. These findings suggest that the proper

exploration–exploitation balance depends, in complex ways, on the pressures for global versus local adaptability

posed by the interaction of turbulence and complexity.

Keywords: exploration and exploitation; NK model; organizational learning; turbulence; complexity

Introduction

Exploration and exploitation are generally considered the

two key modes of organizational adaptation (March,

1991; Raisch et al., 2009; O’Reilly and Tushman,

2013). However, despite the relative conceptual

consensus in recent literature that both exploration and

exploitation should be seen as forms of search and

adaptation, albeit of different types (Gupta et al., 2006;

Lavie et al., 2010), the literature has frequently equated

the tension between e xploration and exploitation wit h

the tension between adaptability and efficiency (e.g.,

Benner and Tushman, 2003; Adler et al., Winter, 2009;

Posen and Levinthal, 2012). The emphasis of research

on organizational ambidexterity has typically been on

ensuring sufficient exploration in dynamic environments

(e.g., Levinthal and March, 1993; Benner and Tushman,

2003; Siggelkow and Levinthal, 2003; Siggelkow and

Rivkin, 2006; Walrave et al., 2011), and the conditions

in which organizations need to conduct exploitative

adaptation have received relatively little attention.

In this study, I investigate the relative merits of

exploratory and exploitative adaptation in different types

of dynamic task environments. I utilize a widely used

simulation model of adaptive search in the complexity

literature –the NK landscapes framework (Kauffman,

1993; Levinthal , 1997) –and extend this model by

modeling the exploration–exploitation balance as a

resource allocation decision between the two processes

of distant and local search. I examine two key

environmentalcharacteristics, complexity andturbulence,

and look at how the optimal balance between exploratory

and exploitative adaptation is influenced by the

complexity and turbulence of the organization’stask

environment.

While the simulation results offer some support for the

widely held view that exploration becomes relatively

more important than exploitation when environmental

turbulence and complexity increase (see e.g., March,

1991; Levinthal, 1997; Sidhu et al., 2004; Rivkin and

Siggelkow, 2007; Fang et al., 2010; Lavie et al., 2010),

the results also point out two situations in which this

conventional wisdom does not hold. First, with low to

moderate levels of turbulence, increasing turbulence

increases the need for exploitative adaptation faster than

the need for exploratory adaptation, and only high levels

of turbulence are found to necessitate exploration over

exploitation. Second, the effects of turbulence and

complexity are found to interact and jointly increase the

importance of exploitation over exploration in

environments with high degrees of both turbulence and

complexity.

Correspondence: Juha Uotila,Warwick BusinessSchool, The Universityof

Warwick, Coventry CV4 7AL, United Kingdom, Tel: +44 75115 08022.

E-mail: juha.uotila@wbs.ac.uk

European Management Review, Vol. 15, 505–519, (2018)

DOI: 10.1111/emre.12140

©2017 European Academy of Management