Taming the Antagonistic Forces of Exploration and Exploitation

32 Pages Posted: 27 Jun 2007

See all articles by Thorbjorn Knudsen

Thorbjorn Knudsen

University of Southern Denmark - Department of Marketing & Management - Strategic Organization Design Unit (SOD)

Nils Stieglitz

Frankfurt School of Finance & Management; University of Southern Denmark - Strategic Organization Design Unit (SOD) - Department of Marketing & Management

Date Written: May 7, 2007

Abstract

The challenge of adjusting exploration and exploitation is usually portrayed as finding and maintaining a balance between two antagonistic forces. This challenge is rarely contrasted with the idea of sequencing exploration and exploitation as two distinctive stages of search. Building on prior work on the NK analysis in organizational studies, the present paper develops a modeling structure to address this important gap in our knowledge. We model exploration as a wider search among alternatives, and exploitation as the refinement of a chosen alternative. Our model allows consideration of both a set balance and a dynamic adjustment of exploration and exploitation within a single stage of search. The results reported here firmly establish that a two stage search is superior to a fixed balance of exploration and exploitation. This conclusion is quite robust. A dynamic adjustment version of our model puts fewer cognitive demands on decision makers, yet reaps significant gains by mimicking the two-stage search process. Overall, we suggest how the antagonistic forces of exploration and exploitation can be tamed.

Keywords: Exploration, exploitation, search, organizational adaptation, strategic organization design

JEL Classification: C61, D21, D83

Suggested Citation

Knudsen, Thorbjorn and Stieglitz, Nils, Taming the Antagonistic Forces of Exploration and Exploitation (May 7, 2007). Available at SSRN: https://ssrn.com/abstract=996798 or http://dx.doi.org/10.2139/ssrn.996798

Thorbjorn Knudsen (Contact Author)

University of Southern Denmark - Department of Marketing & Management - Strategic Organization Design Unit (SOD) ( email )

Faculty of Social Sciences
Campusvej 55
DK-5230 Odense
Denmark

HOME PAGE: http://www.sdu.dk/sod

Nils Stieglitz

Frankfurt School of Finance & Management ( email )

Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany

University of Southern Denmark - Strategic Organization Design Unit (SOD) - Department of Marketing & Management ( email )

Campusvej 55
DK-5230 Odense M
Denmark

HOME PAGE: http://www.sdu.dk/sod

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