Vous êtes sur la page 1sur 69

I

08
Fall

Research Training and Bachelor Thesis
Strategic Exploration Activities and Firm Performance








Team number: 10
Date of submission: 03-06-2014



Thesis Supervisor:
MSc. Tuncdogan, A, Aybars
Course Supervisor:
Dr. Hak, A. Tony


van den Heuvel, F.M.C. Candel, J.D.W.F. Jansen, T.C.J.
ERNA: 400792fh ERNA: 402981jc ERNA: 387463tj
Telephone: +31610816198 Telephone: +31625331900 Telephone: +31612882110

This document is written by Tibbe Jansen, Gijs van den Heuvel, and Jonathan Candel, who declare that
each individual takes responsibility for the full contents of the whole document. We declare that the text
and the work presented in this document is original and that no sources other than mentioned in the text
and its references have been used in creating it. RSM is only responsible for supervision of completion of
the work but not for the contents.

Contents
List of Tables ............................................................................................................................................ 5
List of Figures ........................................................................................................................................... 5
Abstract ................................................................................................................................................... 6
1. Introduction ......................................................................................................................................... 7
1.1 General Importance ...................................................................................................................... 7
1.2 Theory ............................................................................................................................................ 7
1.3 Current Study ................................................................................................................................ 8
1.4 Thesis Structure ............................................................................................................................. 9
2. Critical Synthesis ................................................................................................................................ 10
2.1 The Structural Process of Selecting Studies ................................................................................ 10
2.2 Critical Evaluation of Studies ....................................................................................................... 10
2.3 Results ......................................................................................................................................... 12
2.3.1 Conclusions from Observed Effect Sizes .............................................................................. 13
2.4 Discussion .................................................................................................................................... 17
2.4.1 Possible Moderating Variables ............................................................................................. 17
2.4.2 Managerial Implications Regarding the Observed Effect Sizes ............................................ 18
2.4.3 Recommendations for Contributing Studies ........................................................................ 19
3. An Attempt at Best Practice Research .............................................................................................. 20
3.1 Introduction ................................................................................................................................. 20
3.2 The Study ..................................................................................................................................... 20
3.2.1 Formulating a Best Practise for Generating Empirical Evidence ........................................ 20
3.2.2 The Complications of the Ideal Research Situation .............................................................. 21
3.2.3 Population and Sample ........................................................................................................ 21
3.3 The Structural Process of the Research Design ........................................................................... 22
3.3.1 Specification of the Research Question ............................................................................... 22
3.3.2 Specification of the Research Strategy ................................................................................. 23

3.4 Results ......................................................................................................................................... 27
3.4.1 Effect Size Measures............................................................................................................. 27
3.4.2 Worst Case Response Bias Analysis ...................................................................................... 28
3.5 Advanced Meta-Analyses ............................................................................................................ 28
3.5.1 General Meta-Analysis ......................................................................................................... 28
3.5.2 Geographically Advanced Meta-Analysis ............................................................................. 29
3.6 General Conclusion...................................................................................................................... 30
3.6.1 Managerial Implications ....................................................................................................... 31
3.6.2 Limitations and Recommendations for Future Research ..................................................... 31
3.7 Lessons Learned .......................................................................................................................... 33
4. References ......................................................................................................................................... 35
5. Appendices ........................................................................................................................................ 39
Exploration Activities & Firm Performance
5
List of Tables
Table 1. Table with General Information about the Papers .................................................................. 12
Table 2. Geographical and Sector Sample Characteristics of Each of the Studies Included. ................ 15
Table 3. Data Matrix with the Values of the Dependent and the Independent Variable for Each
Individual Case....................................................................................................................................... 25

List of Figures
Figure 1. Number of Cases (N) and Effect Sizes (Correlation Coefficient: r) per Paper ........................ 12
Figure 2. Visual Representation of the Individual Studies that are Included into the Meta-analysis as
well as a 95%-Confidence Interval. ....................................................................................................... 14
Figure 3. Visual Representation of the Individual Studies and the Combined Confidence Interval from
Studies that Regard Non-US Firms. ....................................................................................................... 16
Figure 4. Visual Representation of the Individual Studies and the Combined Confidence Interval from
Studies that Regard US Firms. ............................................................................................................... 16
Figure 5. Visual Representation of the Possible Moderating Variables that are Discussed in Section
2.4.1. ...................................................................................................................................................... 18
Figure 6. Visual Representation of the Meta-analysis including the Studies from the Critical Synthesis
and the Study from the Attempt at Best Practice Research. ................................................................ 29
Figure 7. Visual Representation of the Meta-analysis including All Confidence Intervals from the
Different Geographical Areas. ............................................................................................................... 30
Exploration Activities & Firm Performance
6
Abstract
In recent years, a lot of research has been conducted on organizations exploratory activities
and the possible association these activities have with firm performance. James March
(1991) was one of the researchers who introduced the term exploratory activities and
describes it as: things captured by terms such as search, variation, risk taking,
experimentation, play, flexibility, discovery and innovation. In the first part of this Bachelor
Thesis, several quantitative studies will be compared that investigate, to some extent, the
possible association between exploratory activities and firm performance. These studies
were first critically analyzed and subsequently formed into a meta-analysis. This analysis
takes into account all the selected studies and predicts a confidence interval for all the
studies combined. The second part of the Thesis will consist of an Attempt at Best Practice
Research to construct a methodologically-sound study that searches for a possible
association between the same variables as used in the meta-analysis: exploratory activities
and firm performance. Combining both parts of this thesis will answer the research question:

Hopefully, the study will also provide substantial insights into the world of exploration and
firm performance, advice with regard to several practical implications and provide
suggestions for future research on the topic.
To what extent are a firms exploration activities associated with its performance?








Exploration Activities & Firm Performance
7
1. Introduction
1.1GeneralImportance
The mystery of a firms performance has yet to be discovered. Despite the fact that many
researchers have tried to unravel the secret on how to maximize performance. Since the
beginning of the 1990s, companies have to deal with the process of the destruction of
traditional competitive advantages and the building of new set of advantages (DAveni,
1994). Traditional advantages no longer guarantee the long-term gains. It charts the
evolution of industries through a series of competitive moves and countermoves that can be
labeled as dynamic strategic interactions. (DAveni, 1994). As once said by Adam Grant
(2011): What do we know, what dont we know, and so what? What we do not know is to
which extent a firms exploration activities are positively associated with firm performance,
while this is valuable to managerial relevance. However, what we do know, is that todays
firms have to move more quickly and boldly and experiment in ways that do not conform to
the traditional theory (Volberda, 1996). This is due to the rapidly changing and ultra-
competitive markets. The basic problem confronting an organization is to engage in
sufficient exploitation to ensure its current viability and, at the same time, to devote enough
energy to exploration to ensure its future viability. (Levinthal and March, 1993). Therefore
there is the need for strategic renewal in today's dynamic markets. According to Hoffman
and Hegarty (1993) the focus on strategic renewal is a growing source of strategic
advantage. One way to do this is to explore new opportunities, also called: exploration (e.g.,
Benner and Tushman, 2003; DAveni, 1994; Day, 1994; Jansen et al., 2006; Levinthal and
March, 1993; Volberda, 1996; Young et al., 2001)
1.2Theory
To give a more specified insight into the relevant theory, the following part will show a
concise but detailed summary of previous studies. Whereas chapter 1.3 will be focused on
the construction of this particular critical synthesis. Regarding the existing theory, studies
have shown according to Alexiev et al. (2010) that some top management teams (TMTs)
have the ability to recognize distant opportunities and devote organizational resources to
exploratory innovation, while others fail to do so and put their organizations at risk of
becoming obsolete (Alexiev et al., 2010; Day, 1994; Kaplan et al., 2003; Young et al., 2001).
Exploration Activities & Firm Performance
8
Exploration (or exploratory activities) includes things captured by terms such as search,
variation, risk taking, experimentation, play, flexibility, discovery and innovation. (March,
1991). Exploration activities are necessary to perform well in todays rapidly changing
environment. According to March (1991) exploration improves the firms performance, he
says that exploration involves the acquisition of new information about alternatives and
thus leads to the improvement of future (long-term) performance. (March, 1991). Also
other researchers like Cao et al. (2004) and Auh & Menguc (2005) discovered this
relationship. In sum, we can say that exploratory activities build on new knowledge and
require the departure from existing skills and capabilities. (Benner and Tushman, 2003;
Jansen et al., 2006) This type of innovation is crucial for organizations operating in more
dynamic environments (Jansen et al., 2006), it is also considered to be key to an
organizations long-term survival (Levinthal and March, 1993) and leads to the
improvement of future performance (March, 1991).
1.3CurrentStudy
The aim of this paper is to present a critical synthesis of empirical evidence about the impact
of a firms engagement in exploration activities related to the firms performance.
Subsequently, the critical synthesis itself is aimed at comparing different studies conducted
by different researchers that focus on the same subject. The combined results of the
synthesis will give a clear understanding of what has already been covered by previous
research regarding the research question of this paper. This research question can be
formulated as follows: To what extent are a firms exploration activities associated with its
performance? The research question asks for the effect of exploration activities when
looking at a firms performance. In other words, when exploration activities are being
practised within a firm, we would like to see the effect of this particular change (positive,
negative or none) on the firms performance. The practical relevance of the research is to
help a companys management to decide whether to pursue exploratory activities. Also
contributing to the practical relevance, the analysis of previous profits (or losses) may be
linked to the way exploratory activities are used in the past. By way of example, an
exploratory activity in the shape of a completely new innovative product should increase the
firms performance substantially in order to cover the enormous costs and amounts of time
involved. The mechanism behind this example is that due to exploring new activities (e.g.:
Exploration Activities & Firm Performance
9
investments) firms can gain competitive advantage (e.g.: higher efficiency, revolutionary
new products, flexibility) and therefore increase profitability. The focal unit used in the
hypothesis is the firm. The theoretical domain will exist of all firms in the world, in all
economic sectors, in all countries, at all times. In theory, the relationship (mechanism) might
be causal and positive because it is expected that exploration activities can lead to new
competitive advantages for a firm which will then increase its performance. Summarized, the
above stated can be concluded as: To what extent is the association between firms
performance and exploration activities, where the firm can be described as the focal unit,
and it is expected that exploration activities can lead to new competitive advantages for the
theoretical domain that can be described as all firms in the world, in all economic sectors, in
all countries, at all times.
1.4ThesisStructure
The overall structure of this thesis is as follows. First is described the critical synthesis. Here
we critically evaluated and synthesized the results of empirical studies and described a
critical evaluation of the empirical evidence regarding a claim about the influence of an
independent variable on a dependent variable. It includes the selection of the studies, the
critical evaluation as well as the results and a discussion. Second, we described an attempt at
best practice by designing and conducting our own study. This part contains an introduction
where we described the aim of the paper. The study section where we described the
methods applied in the study including a description and justification of the sample and how
we measured the variables. Finally we described the learning points. This part contains what
is learned from executing this attempt at best practice.
Exploration Activities & Firm Performance
10
2. Critical Synthesis
2.1TheStructuralProcessofSelectingStudies
To start, it was important to look for studies and other existing empirical evidence regarding
a possible effect (of any nature) between the dependent and independent variable. The first
approach was to use Google Scholar and use specific keywords that might bring up relevant
studies. Amongst others, keywords that we used are: Firm performance, Exploration
activities, Exploration, Business and Research and Development. Initially, there were
obtained a lot of results from the first attempts of searching. So much results that the search
process needed to be more precise. The keyword Exploration also resulted in a lot of
medical papers that could not be used for the critical synthesis. To surpass this problem,
primarily the combination of Exploration, Activities and Business was used. Luckily, there
were a couple of meta-analysis papers found that showed in advance which paper could be
of use for the critical synthesis. Furthermore, a lot of papers used the ambiguous term
ambidexterity, which in most cases refers to a mix of exploration and exploitation activities.
Firstly, papers containing this term were perceived to be useful. But during further analysis
the definition of this term seemed too confusing to work with. Additionally, it seemed that
these papers often also used this ambidexterity during the evaluation of the results and
during the data analysis. Therefore, papers that used ambidexterity were excluded from
the critical synthesis. For this reason, it was needed to exclude two papers from the critical
synthesis that were initially analyzed. See Appendix A for the two excluded papers.
2.2CriticalEvaluationofStudies
In order to critically evaluate the different papers found, the checklist provided in the Course
Book (Hak, 2013) was used. (See Appendix B for a full research evaluation of each of the
studies included in the critical synthesis) Additionally, like stated in the previous chapter, we
evaluated whether there were signs for ambidexterity uses and if there were, we excluded
the measurements from the analysis. Consistent with the course book, we critically
evaluated each of the following elements. First, there had to be found out whether the
chosen study contained a causal relationship between the two variables. And if this was the
case, whether the researchers were entitled to make such a claim according to the research
strategy they used. For example, it is not justified to make a causal claim when the
Exploration Activities & Firm Performance
11
researchers use a cross-sectional research strategy. Second, there was checked whether the
effect size parameter used was consistent with the research strategy. This was the case in all
of the situations. Third, there was checked whether the population from the selected studies
matched was part of the theoretical domain that was set earlier in the critical synthesis.
Therefore, the population of each study needed to be exactly specified. Fourth, also
regarding the population, it was important to know whether the population consisted out of
a sample or that it concerned a census population in which all cases were investigated.
Important here was that the study should not contain a convenience sample, in which cases
are chosen because the researcher prefers them or has easy access to these cases.
Everything was checked carefully and inconveniences were reported whenever necessary.
Fifth, the very important element of non-response (i.e.: missing cases) was considered. Like
Tony Hak states in the Course Book: The problem with this type of bias is that we do not
know how large it is, for the simple reason that the missing cases are missing. (Hak, 2013)
Therefore, there is carefully checked how the different researchers dealt with non-response.
Sixth, there is also paid a lot of attention to the measurement procedures of the different
papers. Amongst others, there is monitored for the correct validity, inter-item reliability,
accuracy and trustworthiness of the data and the results; any perceived inconvenience was
reported. Additionally, it was determined whether the cases consisted out of respondents
or informants. Seventh, the study is not supposed to make claims that reach further than
the studied population. Although this seems obvious, many researchers do not stick with it.
Eighth, there was checked whether the different populations were homogeneous or
heterogeneous. According to Professor Hak in Business Research the populations studied are
almost always heterogeneous, as he states that homogeneity certainly cannot be assumed in
business research since it should only be assumed after a series of studies in rather
different populations have all shown more or less similar results. (Hak, 2013) Subsequently,
there is also checked whether within the different papers, there is referred (regarding for
instance the effect sizes or other results) to other, previously conducted researches. Ninth,
for each study was tried to determine the practical relevance of the observed effect sizes
through the use of confidence intervals. In way of conclusion, the claims made by the
authors were critically evaluated for correctness and accuracy.
Exploration Activities & Firm Performance
12
2.3Results
In this concluding part of the critical synthesis there is talked about the similarities and
differences that are observed during the analysis of the different papers. Below there is
made a summary table (Table 1 and Figure 1) that provides information about each paper
separately. The numbers of the different papers correspond with the numbers in the general
meta-analysis only (i.e. the meta-analysis that comprehends all papers from the critical
synthesis).
Table 1. Table with General Information about the Papers
Paper Name Author Effect Size Cases #
1. Balancing Exploration and Exploitation: The
Moderating Role of Competitive Intensity
Seigyoung Auh and
Bulent Menguc
r = 0.70
[0.667 ; 0.731]
980
2. The Influence of Founding Team Company
Affiliations on Firm Behavior
Christine M.
Beckman
r = 0.190
[0.024 ; 0.346]
141
3. Unpacking Organizational Ambidexterity:
Dimension, Contingencies, and Synergistic Effects
Cao, Q. Gedajlovic, E.
Hongping, Z.
r = 0.311
[0.139 ; 0.465]
122
4. Exploratory Innovation, Exploitative Innovation,
and Performance: Effects of Organizational
Antecedents and Environmental Moderators302
Jansen, J.J.P. Van
den Bosch, F.A.J.
Volberda, H.W.
r = 0.180
[0.064 ; 0.291]
283
5. Exploitation, Exploration, and Firm Performance:
The Case of Small Manufacturing Firms in Japan
Isobe, T., Makino, S.,
Montgomery, D. B.
r = 0.740
[0.684 ; 0.787]
302
6. Balancing Exploration and Exploitation in
Alliance Forming
Lavie, D and
Rosenkopf, L.
r = 0.050
[-0.034 ; 0.133]
547
7. Alternative Knowledge Strategies, Competitive
Environment, and Organizational Performance in
Small Manufacturing Firms
Bierly, P. E. and Daly,
P. S.
r = 0.253
[0.055 ; 0.432]
98


Figure 1. Number of Cases (N) and Effect Sizes (Correlation Coefficient: r) per Paper
Exploration Activities & Firm Performance
13
2.3.1 Conclusions from Observed Effect Sizes
First, the geographic dispersion of the populations that are used varies immensely. The only
similarity is that in all papers firms are used as the unit of analysis. But amongst others
there are conducted researches that investigate firms in Australia, Japan and Asia. This
makes it possible that firms from different geographic regions act differently due to for
instance different cultural habits. Therefore, later on in this conclusion, there will be added
an extra part that tries to group different main geographical areas, in order to check
whether there might be geographically-bound differences in effects. Similarly, the different
industries of the different population vary as well. It can be noticed though that mostly the
firms operate in an industrial or high-tech context. Probably this choice is made because the
variety in firm exploration is expected to be best observable in these kinds of industries. For
these meta-analyses only the confidence intervals were used instead of using the combined
correlation coefficient. While the combined correlation coefficient may seem suitable, Hak
(2013) states: "Because the effect sizes are expected to differ between populations, a critical
synthesis of the extant empirical evidence regarding a hypothesis should not focus on
calculating an average or overall effect size for the domain. Such an average has hardly any
meaning".
Furthermore, it is important to note the differences in sampling size used in each of the
papers. These vary from 98 to 980 observed cases. This is important because in general
bigger sampling sizes are perceived to be giving more accurate results. A small visual
representation of the different studies with their effects and corresponding CIs can be found
below in order to show the effect visually (figure 2). Furthermore can be concluded from this
meta-analysis in which all the seven studies are compared and analyzed, that the 95%-
confidence interval ranges from 0.001 up to 0.669. This means that there can be stated with
a certain amount of confidence that there is a moderate likelihood of an association
between exploration activities and firm performance in general. The total amount of
subjects that are included in this meta-analysis is 2473.



Exploration Activities & Firm Performance
14

Figure 2. Visual Representation of the Individual Studies that are Included into the Meta-analysis as well as a
95%-Confidence Interval.
Moreover are most of the studies cross-sectional studies. This kind of method is used often
in real business situations (like in this synthesis) because the data can be obtained relatively
easy through the use of surveys. But for the quality of the outcomes it would have been
better to use longitudinal research methods. According to the course book, The internal
validity of the longitudinal study (for a causal claim) is still somewhat higher than the
internal validity of the cross-sectional study because of the chronology of (first) the change
in the value of the independent variable and (next) the change in the value of the dependent
variable (as in the time series study). (Hak, 2014) Nevertheless, a renowned study on the
advantages and disadvantages between longitudinal and cross-sectional research quotes:
Specifically, our research reveals that cross-sectional data is most appropriate for studies
that examine concrete and externally-oriented constructs, sample highly-educated
respondents, employ a diverse array of measurement formats and scales, and are either
descriptive in nature or strongly rooted in theory. (Rindfleisch et al., 2007) Since in most of
the papers used there is made use of highly-educated respondents and the constructs of
exploration activities and firm performance are embedded deeply in the theory, this
might justify partly for the use of cross-sectional studies in the synthesis.
Some reoccurring characteristic regarding the different studies in the critical synthesis can
be identified as the structural absence of drawing probability samples. This can be
considered to be a big disadvantage. However, there are also very positive features that
characterize the different papers. In almost all of the papers the results are checked
intensively for inter-item reliability, validity and the possible presence of multicollinearity.
Taking these different measures contributes to the final interpretation of the results and
thus can be said that although probability sampling was not common, the results obtained
Exploration Activities & Firm Performance
15
from these papers can be perceived valid and accurate and can also be used for investigating
the initial hypothesis that was described in the introduction.
The Search for Geographically Bound Effects
Like stated earlier, due to the difference in geographical settings of the package of papers
that is included into the meta-analysis, it is possible that studies that are conducted in a
particular geographic area have differing effects than others. That is why we would like to
add a small section in which we try to divide the different studies into two main groups to
see whether the effects might differ. First, the following table (table 2) shows the
geographical and sector background of each of the studies included.
Table 2. Geographical and Sector Sample Characteristics of Each of the Studies Included.
Study Geographical
background of
the data used
Industry / Sector from
which data was derived
1. Balancing Exploration and Exploitation: The
Moderating Role of Competitive Intensity
Australian Manufacturing firms
2. The Influence of Founding Team Company
Affiliations on Firm Behavior
California, United
States
High-technology
industries
3. Unpacking Organizational Ambidexterity:
Dimension, Contingencies, and Synergistic Effects
China High-technology
industries
4. Exploratory Innovation, Exploitative Innovation,
and Performance: Effects of Organizational
Antecedents and Environmental Moderators
Europe Financial services firms
5. Exploitation, Exploration, and Firm Performance:
The Case of Small Manufacturing Firms in Japan
Japan Manufacturing firms
6. Balancing Exploration and Exploitation in Alliance
Forming
United States Software firms
7. Alternative Knowledge Strategies, Competitive
Environment, and Organizational Performance in
Small Manufacturing Firms
Mid-Atlantic
region of the
United States
Manufacturing firms

As can be seen in table 2, far most of the studies are conducted in a manufacturing or high-
technology sector. Additionally there is one software company that can also be classified
somehow as a technology sector- and one financial institution, which could be perceived as
something very different. So there is decided to make two groups based on geographical
Exploration Activities & Firm Performance
16
differences only. Since there are three studies included that are conducted in the United
States there is decided to make two new smaller meta-analyses: one containing the
studies from the US and the other one containing the other studies (Rest of the World). The
results of those two sub-meta-analyses can be seen in figure 3 and figure 4.

Figure 3. Visual Representation of the Individual Studies and the Combined Confidence Interval from Studies
that Regard Non-US Firms.

Figure 4. Visual Representation of the Individual Studies and the Combined Confidence Interval from Studies
that Regard US Firms.
As can be seen from the different sub-meta-analyses the results are somewhat different for
US firms compared to the Rest of the World (RoW). In the comparison of the four RoW
studies, there is still a moderate likelihood for an association between the two variables and
the effect measured is even stronger (CI [-0.008 ; 0.826]). On the contrary, the effect
measured earlier on is a lot less secure in the analysis concerning US firms (CI [-0.146 ;
0.409]). Therefore, this grouping is very useful since now there can be concluded that the
effect (if any) will probably be more present in non-US firms and probably be less present in
firms that are based in the US.
Exploration Activities & Firm Performance
17
2.4Discussion
The studies that we found and analyzed are the studies that know of to be of good indication
to our own research. There were a lot of hits on Google Scholar using the keywords that we
set in advance. Nevertheless, as we are fairly new to this method of selecting and analysing
former studies, there is always the chance for possible biases. For instance, we selected the
studies that we thought of to be applicable. But it is highly possible that studies were not
included because of the fact that the paper did not show the information that was needed
on the first sight, while these might have been of considerable value if investigated with the
help of professionals, or even better, with the authors. This would be preferable to avoid a
possible selection bias. Secondly, we had a strong focus on correlations, disregarding other
facets that were included and might sketch a different portrait that only correlations might
bring up. To improve on the above stated, more time needs to be spend on the analysis and
possible implications of other measures than correlation (regression analyses were checked
for our critical synthesis for possible problems like multicollinearity). As way of conclusion
and perhaps the most important point to bring up is the discussion around ambidexterity.
When clear and mutual understandings might be achieved with a single definition about
what ambidexterity incorporates, a huge amount of studies might be included in this critical
synthesis. As we have chosen not to include ambidexterity, it is possible that we missed
possible relevant data that might give us a different perspective or more weight to the
existing results. Nevertheless, as this is still a problem, ambidexterity was kept out in this
critical synthesis.
2.4.1 Possible Moderating Variables
As can be derived from existing literature, researchers often propose different moderating
variables that can have an effect on the extent to which exploratory activities are associated
with the firm performance (see figure 5). In the papers that are used in the critical synthesis
several of such moderating variables are introduced. Auh and Menguc (2005) introduce the
role of competitive intensity as a possible moderating variable, Cao et al. (2009) introduces
the role of environmental munificence and the size of the organization as a possible
moderator and states: A firms size is strongly indicative of the resources it possesses at its
immediate disposal (Cao et al., 2009). As all of these researches were part of the same
Exploration Activities & Firm Performance
18
research area, these variables can also be considered as possible moderators in this best
practise research.

Figure 5. Visual Representation of the Possible Moderating Variables that are Discussed in Section 2.4.1.
2.4.2 Managerial Implications Regarding the Observed Effect Sizes
In general, the CIs in figure 2 show the possibility for a small to moderate association
between exploratory activities and firm performance. From this result can be concluded that
the managerial relevance could be constructed in a way that exploratory activities are very
likely to contribute during firm decision making. It would be a mistake to disregard the effect
that exploratory activities could have on the firm performance as it may lead to competitive
advantages by strengthening the fit with its surrounding environment. However, particular
situations demand a specific insight for the firm in question by which it is recommended to
conduct further research whether the likelihood of an association is in order for that
particular company in that particular time and situation. Furthermore, as can be derived
from the results after all the effect sizes were divided by region, the data provide real and
valid managerial relevance. The most important of which; for managers that operate in US
firms, it would be less attractive to use exploratory activities in order to boost performance
whereas in the rest of the world this would make more sense according to the comparison.
However, it is still important to note that there are only taken into account a limited amount
of studies. Therefore it would be recommended to perform future research with a bigger
amount of studies in order to make even more extensive grouping possible and to reinsure
that the effects observed here are trustworthy.
Exploration Activities & Firm Performance
19
2.4.3 Recommendations for Contributing Studies
There are some recommendations for contributing studies that are supported by the
literature. These recommendations contribute in order to obtain empirical evidence
regarding a certain effect. First, a further divide between geographical area and industrial
sector is necessary to assess the generalizability of the data (Cao et al., 2009; Lavie and
Rosenkopf, 2006). According to Cao et al. (2009) some locations, like high-tech parks, may
have a resource advantage relative to familiar firms outside of these zones (Cao et al.,
2009). Also Lavie and Rosenkopf (2006) suggest that outcomes may vary in other industries
and produce different patterns. Therefore it is recommended to set up more studies in
different industrial sectors in a more diversified geographical area. Second, a larger sample is
recommended to increase the reliability of the study. Along this principle, He and Wong
(2004) recommend that Future research should assemble a larger sample to provide more
fine-grained controls for market and technological environmental factors, and to examine
how the optimal balance between exploration and exploitation may be contingent on such
environmental factors. (He and Wong, 2004). Therefore it is recommended to maximize the
sample as much as possible. Third, because most of the studies used a cross-sectional
research strategy in which CEOs were asked to provide information, a common method bias
can influence the studys results due to the use of these so called self-reported measures.
(Auh and Menguc, 2005) Therefore it is recommended for future research to make more use
of objective data such as financial reports in order to be able to better monitor the quality
(i.e.: validity, (inter-item) reliability and measurement accuracy) of the data. Fourth, like
Isobe et al. (2004) state in their research, cross-sectional research says little about the
dynamic process of competitive strategy. Longitudinal research on the contrary is more
useful in the long term determination of the possible presence of a certain association. (Cao
et al., 2009; Jansen et al., 2006; He and Wong, 2004) Especially because the effect of
exploratory activities in most cases is only visible over a longer time period. An additional
advantage of longitudinal research is that it is capable of identifying a possible causal
relationship whereas cross-sectional research cannot do this. From these considerations,
there can be recommended that future research should preferably consist of longitudinal
research only.
Exploration Activities & Firm Performance
20
3. An Attempt at Best Practice Research
3.1Introduction
The aim of this part of the thesis is to pursue an Attempt at Best Practice Research ourselves.
The best possible research will be conducted taking into account and discussing the different
critics and limitations from the papers in the critical synthesis and the warnings and theory
provided by the course. However, the process should be approached realistically: due to
knowledge constraints and other limitations, we realize that the research most probably will
still have lots of constraints. These constraints will be carefully tracked, analyzed and
reported later. In several papers from the critical synthesis there were displayed limitations
of cross-sectional survey research. (Auh and Menguc, 2005; Cao et al., 2009) And some of
these even suggest a longitudinal approach in future research. (Isobe et al., 2004; Jansen et
al., 2006) However, due to time constraints we are not able to conduct a longitudinal
research. Furthermore, in most of the papers, data were collected from a single source (i.e.;
CEOs) because they are perceived to be the most knowledgeable respondents. Therefore,
in some of the papers, research limitations suggest future research to be conducted without
making use of self-reported measures. (Auh and Menguc, 2005) In our research, we will use
objective financial data in order to prevent this single source bias.
3.2TheStudy
3.2.1 Formulating a Best Practise for Generating Empirical Evidence
In order to conduct a best attempt study, it is desirable to describe what the perfect
situation would be regarding the aforementioned hypothesis. Since the hypothesis is highly
expected to be causal, the ideal situation would exist of a field experiment, which carries a
high internal validity. (Hak, 2014) Furthermore, the experiment should ideally use all
companies in the world, with no missing cases, as a population. Then these companies
would be divided into four groups: An experimental group, a control group and within these
two groups each a group with high exploratory activities and one with low exploratory
activities. These activities should be consistently measurable, reliable and valid. Then, the
researchers should be able to manipulate the amounts of innovation activities in the
experimental group while the firm performance variable is carefully monitored over the
years following (since exploration is expected to affect firm performance in the long run, this
Exploration Activities & Firm Performance
21
period is preferably three to ten years). Ideally, also the measurements should be low on
biases (i.e.; both random errors and systematic errors (such as measurement errors and
sample design errors)). (McDaniel, 2012) Ideally, from the data derived, clear outcomes in
the form of confidence intervals, regression data and correlations would follow to enable an
optimal interpretation of the research. To enlighten to what extent the above would be
possible, in the following section the feasibility is further discussed.
3.2.2 The Complications of the Ideal Research Situation
As can be imagined, the situation as described above is not feasible at all. First of all,
researchers will never be able to manipulate key organizational factors such as exploration
activities simply because organizations will not allow them to do so. Second, a census
research that involves all companies in the world will not be feasible due to practical reasons
(i.e.; companies start and go bankrupt all the time, especially when a longer period of
observation is necessary this will be impossible). Also, since there are millions of companies
all over the world, only approaching these will probably already taking a mans live. And
lastly, the statistical analysis of so many data will be too difficult to perform in a bachelor
thesis.
3.2.3 Population and Sample
In an earlier stage of the research design, we decided to approach a company that belonged
to a narrowly defined population. The plan was to survey all managers in the company in
order to derive data. However, partially due to later insights and partially due to advice by
our mentor, we decided that it would be more convenient to use existing data and to use
data from multiple firms from a clearly defined population. Therefore, now there will be
used data from the official European Union Research and Development Scoreboard 2012 &
2013 to set up a cross-sectional research strategy. The Industrial research and Innovation
IRI department of the European commission defines the Scoreboard as: The 2013 EU
Industrial R&D Investment Scoreboard (the Scoreboard) contains economic and financial
data for the world's top 2000 companies ranked by their investments in research and
development (R&D). The sample of the scoreboard consists of 527 companies based in the
EU and 1473 companies based elsewhere. An additional sample comprising the top 1000
R&D investing companies based in the EU is included. The Scoreboard data are drawn from
Exploration Activities & Firm Performance
22
the latest available companies' accounts, i.e. usually the fiscal year 2011 & 2012.
(Hernndez et al, 2013)
In the research that is conducted in this part of the thesis the population can be defined as:
All German businesses with at least 260 employees that are active in either the Technology
Hardware & Equipment sector or in the Software & Computer Services sector and that are
listed in the 2013 EU Industrial R&D Investment Scoreboard (data from 2011 and 2012). The
EU Industrial R&D Investment Scoreboard contains economic and financial data for the
world's top 2000 companies ranked by their investments in research and development
(R&D). (Hernndez et al, 2013) The sample was drawn from the R&D Scoreboard using the
clearly defined population parameters. Therefore, the sample consisted of 26 companies
that fit the profile in 2012 and 24 cases in 2011. However, in order to have a more complete
sample, data from one case in 2011 was found in the companys annual report (USU, 2012).
So in total, there was used data from 25 cases in 2011. Ranging from small to big amounts of
R&D expenditures as well as different sizes of the company regarding the amount of
employees, the sample provides enough variety concerning our research strategy. The list of
included companies can be seen in table 3 Data matrix.
3.3TheStructuralProcessoftheResearchDesign
3.3.1 Specification of the Research Question
The focal unit used in the hypothesis is the firm. The theoretical domain will exist of all
firms in the world, in all economic sectors, in all countries, at all times. A firm, in the way we
are using it in our research, is a black box operated so as to meet the relevant marginal
conditions with respect to inputs and outputs, thereby maximizing profits, or more
accurately, present value. (Jensen and Meckling, 1976) The reason why we are aiming at
firm level, is primarily because of the way we want to see how these firms use explorative
(i.e.; Research and Development) activities to enhance its performance. Other focal units
would be way more difficult partially because firms have the tendency to document
decisions in a structural way, enabling us to get the right information for this research.
Since the study searches for the effect of exploration activities on the firms performance, it
is clear to say that the exploration activities, e.g. research and development, will be used as
the independent variable. The firms performance on the other hand, is being observed as
Exploration Activities & Firm Performance
23
the dependent variable in our research to see what the influence effect of the exploration
activities on the performance may be, if any. Therefore, the firm performance is the
dependent variable is this research. The research question: A firms engagement in
exploration activities is positively associated with its performance combines the focal unit
and the variables in a way that we have a clear vision of what we would like to research and
where we need to focus on.
3.3.2 Specification of the Research Strategy
Like already stated in the introduction of the critical synthesis the relationship between
exploratory activities and firm performance is likely to be causal (if there is an effect
measured in the first place). A causal relation is a relation between two attributes (X and Y)
of a focal unit in which a value of X (or its change) results in a value of Y (or in its change).
(Hak, 2013). According to Hak (2013), when the research question implies causality, the best
research strategy is an experimental study. But in our case the cross-sectional study is more
feasible, even though it is well known that a cross-sectional study cannot generate evidence
in support of the causal direction that is implied in the hypothesis. A cross-sectional research
strategy is only valid for a study of the simplest type of hypothesis, namely a study with the
aim to assess how much two variables co-vary. (Hak, 2013). The cross-sectional study is
chosen above the experimental study and the longitudinal study because of the earlier
stated impossibility to carry out an experiment and because of time constraints when
carrying out a longitudinal research. However, non-experimental studies have generally a
higher level of ecological validity, because they allow the observation of associations that
actually exist (Hak, 2013). Also other researchers often conduct cross-sectional studies and
point out the limitations. For instance Alexiev et all. (2010) stated that a limitation is the
cross-sectional design of the study, which prevents them from making a firm conclusion
about the direction of causality between the variables. This was also noted by Jansen (2005)
and Cao, et al. (2009).
As mentioned above, the research strategy used here is a cross-sectional research.
According to Dul & Hak (2007) "selection bias in published results exacerbates the risk of
drawing conclusions about the correctness of a theory based on a one-shot confirmation".
For this reason, the 2011 scoreboard data has been added to the data of 2012. Dul & Hak
(2007) stated that a number of replications are needed before someone can generalize a
Exploration Activities & Firm Performance
24
particular claim. Because this second study (the 2012 scoreboard, data from 2011) is added
to the previous one (the 2013 scoreboard, data from 2012) it is called a serial study. A serial
study is when "one research project consists of a series of replications" (Dul & Hak, 2007).
And because the same research strategies have been used for acquiring the date, it is called
a serial survey (Dul & Hak, 2007). This is used in order to enhance reliability (i.e.: precision).
To organize the data all together, a data matrix is generated which indicates the particular
values of the dependent and the independent variable for each individual case. Additionally,
there is also chosen to provide the standard deviation in order to gain a notion of the
amount of variation there is in each of the variables (Hak, 2013). It is remarkable that
published papers usually not include this matrix in the methods section of the paper.
Adding this matrix to the paper would make the procedures of the study much clearer
(Hak, 2013). On the next page the data matrix (table 3) is shown for the dependent variable
firm performance (in the form of 2011 and 2012 profits) and the independent variable
innovation activities (in the form of 2011 and 2012 R&D expenditures).
The effect sizes that are used, as a result from the data collected below (table 3) will be the
correlation coefficient and the (standardized and unstandardized) regression coefficients.
Since this is a study for detecting the amount of bivariate association, the standardized
regression coefficient will equal the correlation coefficient; so basically there will remain two
main effect sizes. Both have particular advantages and disadvantages. A correlation
coefficient tells more about the theoretical relevance of the results, while regression tells
more about the managerial relevance of the results. As both are indicated, also the
advantages of both can be used to analyse and interpret the results later on. An additional
note here is that these effect sizes will have nothing to do with the possible causality of the
association that is going to be investigated.
Exploration Activities & Firm Performance
25
Table 3. Data Matrix with the Values of the Dependent and the Independent Variable for
Each Individual Case
Cases Value of R&D
Expenditures
2011
( million)
Value of R&D
Expenditures
2012
( million)
Value of
Profit 2011
( million)
Value of
Profit 2012
( million)
1. SAP 1939.00 2253.00 4863.00 4070.00
2. INFINEON TECHNOLOGIES 499.00 455.00 736.00 456.00
3. SOFTWARE 88.08 101.08 270.14 243.84
4. WINCOR NIXDORF 100.17 90.47 162.36 101.25
5. AIXTRON 48.39 69.56 115.01 -125.28
6. ADVA 60.45 65.55 13.21 18.83
7. KONTRON 59.72 65.07 33.70 -32.26
8. LANTIQ 108.52 47.98 -36.29 -29.65
9. NEMETSCHEK 41.23 45.10 28.61 31.10
10. COMPUGROUP MEDICAL 42.85 37.38 34.85 68.20
11. ELMOS SEMICONDUCTOR 34.90 34.13 26.32 11.75
12. PSI 16.20 18.17 10.67 12.89
13. COR&FJA 17.80 14.53 2.07 -19.25
14. P&I PERSONAL & INFORMATIK 13.55 13.85 18.15 24.04
15. MAGIX 7.10 13.18 5.28 2.85
16. FIS KORDOBA N/A 12.13 N/A 3.92
17. NEXUS 11.82 11.37 4.22 5.40
18. MENSCH UND MASCHINE
SOFTWARE
9.45 11.23 11.90 6.18
19. RIB SOFTWARE 7.54 10.42 6.64 11.96
20. SUSS MICROTEC 10.53 9.77 18.74 13.03
21. BETA SYSTEMS SOFTWARE 5.33 8.53 -6.39 1.43
22. INTERSHOP COMMUNICATIONS 6.22 7.28 2.88 -0.72
23. USU SOFTWARE 6.49 7.24 3.55 4.67
24. ATOSS SOFTWARE 6.65 7.11 7.31 7.64
25. FREENET 10.95 6.81 167.80 203.39
26. CENIT SYSTEMHAUS 5.48 6.39 6.28 7.86
N = 25 N = 26 N = 25 N = 26
R&D Exp =
126.30
R&D Exp =
131.63
Profit =
260.24
Profit =
196.11
R&D Exp =
390.263
R&D Exp =
441.499
Profit =
971.352
Profit =
797.730

As giving insight in our measurement protocol, we used the data from this Scoreboard
because of the fact that it was issued for the European Commission and put together by
some leading companies and researchers. The trustworthiness of this document was thereby
Exploration Activities & Firm Performance
26
easy to check as everything was well documented like the methods that they used or the
boundaries that they had set to avoid incorrect data. The European Commission states the
report to be seen as: The Scoreboard is a benchmarking tool which provides reliable up-to-
date information on R&D investment and other economic and financial data, with a unique
EU-focus. The 2000 companies listed in this years Scoreboard account for more than 90% of
worldwide business enterprise expenditure on R&D (BERD). The data in the Scoreboard are
published as a four-year time-series to allow further trend analyses to be carried out, for
instance, to examine links between R&D and business performance (Hernndez et al, 2013).
The report was used to show trends across different industries and sectors, including all data
that was used with their corresponding company name. In our protocol, we tended to use
the data that was most important to our research question and tried to keep all the data
unaltered before using it in our regression analysis.
The population is a part of the theoretical domain. The theoretical domain as described in
the first part of this thesis is defined as: All firms in the world, in all economic sectors, in all
countries and at all times. Due to the fact that we have a clear definition of our own
population with corresponding data from all of these companies, we are able to indicate that
most probably the whole population will be studied and thus the research will be a census
research. Therefore, the sample is the whole population and a probability sample will not
have to be considered. Reliability is defined by Jan van Dalen as a the question whether or
not an indicator produces steady measurement results when applied multiple times. (Van
Dalen, 2014). Due to the nature of our research, the trustworthiness of the results will not
impose problems. The main reason for this is that the data is from the European Commission
and obtained by a strong regulated research.
The variables that need to be defined in our research are both the dependent and
independent variable: exploratory activities and firm performance. Since several researchers
have already defined exploratory activities during the last decades, it is most convenient to
pick the one that suits best to the standards of this thesis. Therefore, we chose the definition
by James March: Things captured by terms such as search, variation, risk taking,
experimentation, play, flexibility, discovery, innovation (March, 1991). This definition is also
convenient do to the different concepts that March uses in the definition. The dependent
variable firm performance however has been defined too often and in very different
Exploration Activities & Firm Performance
27
contexts. Therefore, we decided to use the definition that was used in the R&D Scoreboard
from which we used the data for our analysis, partially because this would give us the
opportunity to use it for the operational procedures in the research. The firm performance
construct captures the companys profit defined by the R&D Scoreboard as following:
Operating profit is calculated as profit (or loss) before taxation, plus net interest cost (or
minus net interest income) minus government grants, less gains (or plus losses) arising from
the sale/disposal of businesses or fixed assets (Hernndez et al, 2013). In order to do be
able to measure the effect of the two variables, we collected the data from the European
Commissions Scoreboard in the format, as they were included in the database. As R&D and
Profit were both included in the Scoreboard, we simply set the parameters right for our
defined population and took note off all the displayed data for our regression analysis.
3.4Results
3.4.1 Effect Size Measures
As stated earlier, there was made use of a bivariate linear regression analysis after the
problem of non-linearity was resolved. The regression analysis shows that Profit (set as
variable profit 2011 and profit 2012 with data deducted from the EU Scoreboard) had a
mean of 260.24 million Euros for 2011 and 196.11 million Euros for 2012 with a standard
deviation of 971.35 million Euros and 797.730 million Euros respectively. R&D (set as
variable R&D 2012 with data deducted from the EU Scoreboard) had a mean of 126.30
million Euros for 2011 and 131.63 million Euros for 2012 with a Standard deviation of 390.26
million Euros and 441.499 million Euros respectively. The number of cases (i.e.; N) for 2011 is
25 companies, and 26 companies for the 2012 dataset. But because the sample was not
normally distributed, we had to take the logarithm of all the variables in order to resolve this
problem of non-linearity. Another problem was that there were some negative values
amongst the profits: because a logarithm of a negative number is impossible, in SPSS these
values were automatically excluded. To solve that problem we added a constant value to all
of the profit values. Subsequently, when looking at the results, the correlation (r) between
R&D 2011 and profit 2011 is 0.533 (i.e.; the Standardized Regression Coefficients Beta,
when two variables are compared only), and a Unstandardized Regression Coefficient B of
0.535, with a R squared of 0.285 and the Adjusted R Square of 0.253. The 95% confidence
interval was given as [0.169 ; 0.901]. The correlation (r) between R&D 2012 and profit 2012
Exploration Activities & Firm Performance
28
is 0.324 (i.e.; the Standardized Regression Coefficients Beta, when two variables are
compared only), and a Unstandardized Regression Coefficient B of 0.304, with a R squared
of 0.105 and the Adjusted R Square of 0.068. The 95% confidence interval was given as [-
0.070 ; 0.678]. These results can be considered important as they can be used later on to
make theoretical and practical conclusions.
3.4.2 Worst Case Response Bias Analysis
As stated by Hak (2013): A worst case is the situation in which the missing information, if
known and added to the matrix, would cause a maximum change in the observed effect. He
also states that a worst-case response bias analysis is highly recommended when less than
95% of the cases are present. As only one case is missing in this study (i.e.: 96.15% is
present), there can be concluded that there is no need for a worst-case response bias
analysis.
3.5AdvancedMeta-Analyses
To enhance managerial relevance it is desirable to include an advanced meta-analysis.
According to Glass (1976) a meta-analysis can be used as " the statistical analysis of a large
collection of analyses that results from individual studies for the purpose of integrating the
findings." It is used in order to create a link between the critical synthesis and Attempt at
Best Practice Research. To give the best overview, there was decided to use three main
geographical areas namely: Europe, U.S.A. and Rest of the World (RoW). Because the
Attempt at Best Practice Research existed of two studied samples that consisted of German
companies, the German geographical area was included (that consisted of our own study) to
compare with the other effect-sizes.
3.5.1 General Meta-Analysis
The first advanced meta-analysis consists of the meta-analysis that was formed in the critical
synthesis with the attempt to best practice included. As described in section 2.3.1, the meta-
analysis contains a method in which all the seven studies can be compared and analyzed for
their combining effect. This provides a 95%-confidence interval that ranges from 0.001 up to
0.669. The total amount of subjects that are included in this meta-analysis is 2473. After
adding the two effect-sizes from the attempt to best practice the results show a 95%-
confidence interval that ranges from 0.079 up to 0.638 (see figure 6). This means that there
Exploration Activities & Firm Performance
29
can be stated with a certain amount of confidence that there is an even higher moderate
likelihood of an association between exploration activities and firm performance in general.

Figure 6. Visual Representation of the Meta-analysis including the Studies from the Critical Synthesis and the
Study from the Attempt at Best Practice Research.
3.5.2 Geographically Advanced Meta-Analysis
To further enhance the view on managerial implication, the divide in geographical areas
when looking at the meta-analysis, might offer vital information to managers in those
specific regions. As previously shown in section 2.3.1, the meta-analysis of the critical
synthesis focussed on two separate regions namely: US and the Rest of the World (non-US).
Now, after the Attempt at Best Practice Research, the study with a sample that consisted of
German companies can be included to enlarge our view on managerial implications when
looking at geographical areas. The geographical areas for this advanced meta-analysis are:
Europe (including Germany), Germany (attempt at best practice on its own), US and the Rest
of the World. The previous meta-analysis on geographical area (from section 2.3.1) shows a
95%-confidence interval of [-0.008 ; 0.826] for non-US firms, whereas US firms show a 95%-
confidence interval of [-0.146 ; 0.409]. When setting all the regions as specified before, the
geographical advanced meta-analysis shows the following results for the following regions.
For Europe the advanced meta-analysis shows a 95%-confidence interval of [-0.211 ; 0.677]
indicating that there is no likelihood for a possible association between the dependent and
independent variable. Secondly for Germany the 95%-confidence interval is [-0.892 ; 0.982]
also indicating that there is no likelihood for a possible association between the dependent
and independent variable. Thirdly the US results show a 95%-confidence interval of [-0.146 ;
Exploration Activities & Firm Performance
30
0.409]. Whereas this result is less spread, also here the results indicate that there is no
likelihood for a possible association between the dependent and independent variable.
Lastly, for the Rest of the World, the outcome is different. The meta-analysis regarding this
geographical area indicates a 95%-confidence interval of [0.127; 0.868], indicating a
moderate likelihood of a possible association between the dependent and independent
variable (see figure 7).

Figure 7. Visual Representation of the Meta-analysis including All Confidence Intervals from the Different
Geographical Areas.
3.6GeneralConclusion
In this chapter conclusions are drawn from the results of this study in order to answer the
research question that states: To what extent are a firms exploration activities associated
with its performance? First, there is discussed whether a general conclusion can be drawn.
Second, to enhance managerial relevance, more detailed conclusions are evaluated.
The general conclusion, that can be derived from the meta-analysis in which all studies are
included, states that there is a small to moderate likelihood of an association between
exploration activities and firm performance (CI [0.079 ; 0.638]). However it is very important
to notice that geographical differences seem to have a large impact on the conclusion
mentioned above. Since the study cannot conclude anything that suggests a possible causal
relationship due to the studys cross-sectional nature, there can merely be implied that
there is a certain likelihood for an association. Therefore, it is important to watch out for the
level of exploration as the likelihood of an association clearly indicates that in times of
decision-making, this awareness might uphold different outcomes.
Exploration Activities & Firm Performance
31
3.6.1 Managerial Implications
The above stated effect regarding the geographical importance in the study is most
important in managerial implications. Therefore, several geographical areas were divided
and the Attempt at Best Practice Research was compared with the earlier studies that were
compared in the Critical Synthesis part. From these comparisons, the remarkable conclusion
can be drawn that only in the Rest of the World (RoW) a moderate likelihood of an
association exists when looking at the confidence interval (as this confidence interval did not
hold negative values). Hence, in all the other geographical areas that were included (US,
Europe and Germany) more research is required in order to provide the necessary
information for management decisions.
The Attempt at Best Practice Research suggests that there might be a small to moderate
likelihood of an association between exploration activities and firm performance in
Germany. However, due to the relatively low amount of cases used in this study, this
conclusion does not rule out other possibilities. It is merely an indication for a possible
effect. Furthermore, when looking at the managerial relevance, it is also important that
multinationals might have to take into account that different countries uphold a different
association between the amount of exploration activities and firm performance. Even the
meta-analysis in the critical synthesis pointed this out. To maximise potential, the
management of these multinationals might have to look at each area (and industry)
individually when looking for a suitable reference for an association to be used in their
decision-making. To pose another possible problem, these geographical areas might also
differ when looking at the way that their accounting is done. Each country might have their
own reporting techniques in which they will calculate their profit. (E.g. IFRS, GAAP, or
otherwise known as the generally accepted accounting principles). (Meulen et al, 2007)
These implications are of importance for management decision-making and should be
considered when using possible associations between exploration and firm performance.
Future research might unfold these implications but as of yet, it is not possible to make
these conclusions.
3.6.2 Limitations and Recommendations for Future Research
Unfortunately, there are also some limitations arising from the data collected. Firstly, as the
report describes, it is possible that some companies are not included in the scoreboard. The
Exploration Activities & Firm Performance
32
report describes that the Scoreboard relies on disclosure of R&D investment in published
annual reports and accounts. Therefore, companies that do not disclose figures for R&D
investment or that disclose only figures which are not material enough are not included in
the Scoreboard. (Hernndez et al, 2013). As a result, it may be that certain companies, and
therefore some company information, is not included in the Scoreboard and therefore not in
our research. Secondly, the paper states that: in some countries, R&D costs are very
often integrated with other operational costs and can therefore not be identified separately.
Because of this, companies from Southern European countries and the new Member States
are under-represented in the Scoreboard. On the other side, UK companies are over-
represented in the Scoreboard. (Hernndez et al, 2013). As our own study only included
German companies, it might be possible that the second limitation is reduced.
As discussed in section 3.6.1, there are several limitations that also pose potential
distortions when looking at the managerial implications. The critical synthesis pointed out
differences between industries and geographical areas, combined with samples that existed
of many cases. The attempt at best practise did not exist of a sample with many cases what
resulted in a broad confidence interval. As this is not recommendable, it is hard to conclude
possible associations in that specific region. For future research, it would be recommended
to include samples of the specified population that will exist of many cases to be able to
minimise the range of the confidence interval. Also, it would be recommended for future
research to conduct a study that will include multiple geographical areas to enlarge the
compatibility of the results for future references.
The limitations and recommendations mentioned above are all factors that are easily
detectable. Moderating factors on the other hand, are not. As discussed in part 2.4.1.,
competitive intensity, environmental munificence and organisation size are already
identified as possible moderating variables. As firm performance and exploration activities
are dependable on many factors, possible-moderating factors can easily be overlooked while
being of importance. It is therefore recommended for future research that a clear and
structured oversight is to be made with the most important possible moderating variables to
see whether they are indeed of moderating value or not.
Exploration Activities & Firm Performance
33
3.7LessonsLearned
While executing the attempt to a best practice research, several learning points could be
identified, which will be discussed in this chapter. First of all, the most important lesson is
that it is not preferable to use p-values at any time. The main reason for this is because of
that the system of Null Hypothesis Significance Testing (NHST) is constructed on the basis of
two existing statistical theories. The first one developed by the Polish mathematician Jerzy
Neyman and statistician Egon Pearson and the second one from Ronald Fisher (Cumming,
2012; Engels, 2014). In the NHST theory, these two theories are used together while they are
absolutely not compatible. Therefore the use of combining p-values with the Cronbachs
Alpha () can be confusing and may even lead to false conclusions. Another reason not to
use p-values is because of the fact that when p-values are obtained, a lot of the data will be
lost. This will be because of the fact that p-values can be derived from confidence intervals
but not the other way around. In this case confidence intervals hold more information and p-
values because of their derived nature will lose a lot of detail.
Second, once again and more explicitly than ever before, we learned the importance of not
generalizing further than the selected population. Even though the temptation to do so is
sometimes present. The results in our research will never be applicable for firms that do not
belong to the narrowly described population. Thus for a researcher, there will always be the
trade-off between a small population for which data could be derived relatively easy and a
larger more general- population for which data probably is much harder to be obtained.
Third, we perceived it to be very hard to obtain data for our narrowly defined population,
especially because this data should be provided by a reliable source. For a moment the
group thought it would be qualitatively better and more reliable to collect data by
themselves, but soon it became clear that, as professor Hak stated before in his Course
Book, it is preferable to not conduct new measurements. (Hak, 2013) Therefore, we have
learned that it is important to make a well-thought and rational decision while you consider
to use either existing data or to collect primary data by yourself. Both have a lot of
(dis)advantages and it is wise to consider one over another in the design-phase of the
research. Additional to this reliability learning point, we experienced that it could be vague
in some research situations (especially in the presence of a relatively small sample size like
ours) whether or not to exclude a case that can be perceived as a possible statistical outlier.
Exploration Activities & Firm Performance
34
Fourth, the definition of the different concepts one is using during ones research is of
utmost important. These definitions should be formally backed-up by the existing literature
whereas this is possible. By doing this, there is made sure that definitions are accepted by
the research-community and that through the reference back to the original literature- the
content of the definition will be better understood. Subsequently, after having defined
important concepts of the research, the right use of the concepts should be monitored
constantly by every member that is working at the research. Violation of the parameters of
the concept can be absolutely disastrous for the implication of the research and the research
itself will lose its credibility.

Exploration Activities & Firm Performance
35
4. References
Alexiev, A., Jansen, J., Bosch, van den F. and Volberda, H. (2010) Top Management Team
Advice Seeking and Exploratory Innovation: The Moderating Role of TMT Heterogeneity,
Journal of Management Studies, 47: pp. 1343-64.
Auh, S. and Menguc, B. (2005) Balancing exploration and exploitation: The moderating role
of competitive intensity, Journal of Business Research, 58: pp. 1652-61.
Beckman, C. (2006) The influence of founding team company affiliations on firm behaviour,
Academy of Management Journal, 49: pp. 74158.
Benner, M.J. and Tushman, M.L. (2003) Exploration, exploitation, and process management:
the productivity dilemma revisited, Academy of Management Review, 28: pp. 23856.
Bierly, P.E. and Daly, P.S. (2007) Alternative Knowledge Strategies, Competitive
Environment, and Organizational Performance in Small Manufacturing Firms,
Entrepreneurship Theory and Practice, 31: pp. 493516.
Cao, Q. Gedajlovic, E. and Hongping, Z. (2009) Unpacking Organizational Ambidexterity:
Dimensions, Contingencies, and Synergistic Effects, Organization Science, 20, 4: pp. 781-96.
Cumming, G. (2012) Understanding The New Statistics: Effect Sizes, Confidence Intervals, and
Meta-Analysis, New York: Routledge.
Dalen, van J. (2014) Interne consistentie multi-item schalen, College 5 - Meetprobleem en
Likert-schalen, Erasmus Universiteit Rotterdam, 21 januari 2014: sheet 48.
DAveni, R. (1994) Hypercompetition, Managing the Dynamics of Strategic Maneuvering,
Free Press; 1 edition (March 28, 1994).
Day, Diana L. (1994) Raising Radicals: Different Processes for Championing Innovative
Corporate Ventures, Organization Science, 5, 2: pp. 148-72.
Dul, J. and Hak, T. (2008) Case Study Methodology in Business Research, Oxford: Butterworth
Heinemann.
Exploration Activities & Firm Performance
36
Duncan, R. (1976) The ambidextrous organization: Designing dual structures for innovation,
The Management of Organization: pp. 167-88.
Geloven, N. and Bossuyt, P. (2019) Intraclass correlatie coefficient, http://os1.amc.nl/
mediawiki/index.php?title=Intraclass_correlatie_coefficient, 18 February 2014.
Gibson, C.B. and Birkinshaw, J. (2004) The Antecedents, Consequences, and Mediating Role
of Ambidexterity, Academy of Management Journal, 47, 2: pp. 209-26.
Glass, V.G. (1976) Primary, Secondary, and Meta-Analysis of Research, Educational
Researcher, 5, 10: pp. 3-8.
Grant, A. (2011) Publishing in AMJPart 3: Setting The Hook, Academy of Management
Journal, 54, 5: pp. 87379.
Gupta, A.K. and Govindarajan, V. (1986) Resource sharing among SBUs: Strategic
antecedents and administrative implications, Academic Management Journal, 29: pp. 695
714.
Hak, T. (2013) The Evaluation and Critical Synthesis of Empirical Evidence, Rotterdam: Tony
Hak.
Hernndez, H., Tbke, A., Soriano, F.H., Vezzani, A., Amoroso, S. and Dosso, M. (2013) EU
R&D Scoreboard, the 2013 EU Industrial R&D Investment Scoreboard, Luxembourg:
Publications Office of the European Union.
He, Z.L. and Wong, P.K. (2004) Exploration vs. Exploitation: An Empirical Test of the
Ambidexterity Hypothesis, Organization Science, 15, 4: pp. 481-94.
Hoffman, R.C. and Hegarty, H.W. (1993) Top Management Influence on Innovations: Effects
of Executive Characteristics and Social Culture, Journal of Management, 19, 3: pp. 549-74.
Isobe, T., Makino, S. and Montgomery, D.B. (2004) Exploitation, Exploration, and Firm
Performance: The Case of Small Manufacturing Firms in Japan, Research Collection Lee Kong
Chian School Of Business.
Jansen, J.J.P. (2005) Ambidextrous organizations, ERIM Ph.D. Series Research in
Management 55.
Exploration Activities & Firm Performance
37
Jansen, J.J.P., Van den Bosch, F.A.J. and Volberda, H.W. (2006) Exploratory Innovation,
Exploitative Innovation, and Performance: Effects of Organizational Antecedents and
Environmental Moderators, Management Science, 52, 11: pp. 1661-74.
Jensen, M.C. and Meckling, W.H. (1976) Theory of the Firm: Managerial Behavior, Agency
Costs and Ownership Structure, Journal of Financial Economics, 3, 4: pp. 305-60.
Kaplan, S., Murray, F. and Henderson, R. (2003) Discontinuities and senior management:
assessing the role of recognition in pharmaceutical firm response to biotechnology,
Industrial and Corporate Change, 12: pp. 20333.
Landis, R.S. and Dunlap, W.P. (2000) Moderated Multiple Regression Tests are Criterion
Specific, Organizational Research Methods, 3, 3: pp. 254-66.
Lavie, D and Rosenkopf, L. (2006) Balancing exploration and exploitation in alliance
formation, Academy of Management Journal, 49: pp. 797-818.
Levinthal, D.A. and March, J.G. (1993) The myopia of learning, Strategic Management
Journal, 14: pp. 95112.
Levinthal, D.A. (1997) Adaptation on rugged landscapes, Management Science, 43: pp. 934
50.
March, J.G. (1991). Exploration and exploitation in organizational learning, Organization
Science, 2: pp. 7187.
McDaniel C. and Gates R. (Paolacci, G) (2012) Selected Chapters from Marketing Research,
9
th
edition, Wiley.
Meulen, van der S., Gaeremynck, A. and Willekens, M. (2007) Attribute differences between
US GAAP and IFRS earnings: An exploratory study, The International Journal of Accounting,
42, 2: pp. 123-42.
Miles, R.E. Snow, C.C. Meyer A.D. and Coleman, H.J. (1978) Organizational Strategy,
Structure, and Process, The Academy of Management Review, 3, 3: pp. 546-62.
Exploration Activities & Firm Performance
38
Rindfleisch, A. Malter, A.J., Ganesan, S. and Moorman, C. (2007) Cross-Sectional Versus
Longitudinal Survey Research: Concepts, Findings, and Guidelines, Institure for the Study of
Business Markets.
Rivkin, J.W. and Siggelkow, N. (2003) Balancing search and stability: Interdependencies
among elements of organizational design, Management Science, 49: pp. 290 311.
USU Software AG (2012) Power Play, Annual report 2012.
Volberda, H. (1996) Toward the Flexible Form: How to Remain Vital in Hypercompetitive
Environments, Organizational Science, 7, 4: pp. 359-379.
Young, G.J., Charns, M.P. and Shortell, S.M. (2001) Top manager and network effects on the
adoption of innovative management practices: a study of TQM in a public hospital system.
Strategic Management Journal, 22: pp. 93551.
Exploration Activities & Firm Performance
39
5. Appendices
Appendix A. Papers Excluded from the Meta-analysis
Appendix A1. The Antecedents, Consequences, and Mediating Role of Organizational
Ambidexterity [excluded from the meta-analysis]

Appendix A2. Exploration vs. Exploitation: An Empirical Test of the Ambidexterity Hypothesis
[excluded from the meta-analysis]

Appendix B. Remaining Articles from the Literature Included in the Meta-analysis
Appendix B1. Balancing Exploration and Exploitation: The Moderating Role of Competitive
Intensity

Appendix B2. The Influence of Founding Team Company Affiliations on Firm Behavior

Appendix B3. Unpacking Organizational Ambidexterity: Dimension, Contingencies, and Synergistic
Effects

Appendix B4. Exploratory Innovation, Exploitative Innovation, and Performance: Effects of
Organizational Antecedents and Environmental Moderators

Appendix B5. Exploitation, Exploration, and Firm Performance: The Case of Small Manufacturing
Firms in Japan

Appendix B6. Balancing Exploration and Exploitation in Alliance Forming

Appendix B7. Alternative Knowledge Strategies, Competitive Environment, and Organizational
Performance in Small Manufacturing Firms


Exploration Activities & Firm Performance
40
Appendix A1. The Antecedents, Consequences, and Mediating Role of
Organizational Ambidexterity [excluded from the meta-analysis]
The article: The Antecedents, Consequences, and Mediating Role of Organizational
Ambidexterity by Cristina B. Gibson and Julian Birkinshaw, was one of the articles that we
decided upon, not to use in our meta-analysis. The reason why we did not include this paper
is primarily because of the use of ambidexterity in the paper. Ambidexterity in this paper
was defined as the influence of alignment and adaptation, which was then correlated against
firm performance.
The data for the dependent variable (ambidexterity and performance) and the independent
variable (organization context) was collected using surveys and conducting interviews from
different levels within the organization to avoid the same-source bias. All items that were
questioned required a seven-point Likert-style scale. These Likert scales were tested on their
inter-item reliability, resulting in a Cronbachs Alpha of 0.80 ( = 0.80). (Gibson and
Birkinshaw, 2004) The results show us the association between the performance and
ambidexterity, also stating that the coefficient for ambidexterity was positive (= 0.47) and
therefor supporting hypothesis 1 in a consistent way with the research strategy. (Gibson and
Birkinshaw, 2004)
While the research itself was set up in a way that was definitely useful for our research, we
decided not to include any papers that use ambidexterity. The problem with ambidexterity is
that there isnt any conclusive definition of what it incorporates. Many papers use
ambidexterity in their own way, resulting in many different definitions of ambidexterity. This
poses a real problem, not only will it be hard to have a clear definition, it might also be
interpreted in a wrong way by ourselves or other researchers in the future. To ensure that
we did not include this potential error, we left out all papers indicating measurements with
the use of ambidexterity even if they seemed usable in the first place.
Exploration Activities & Firm Performance
41
Appendix A2. Exploration vs. Exploitation: An Empirical Test of the
Ambidexterity Hypothesis [excluded from the meta-analysis]
The article: Exploration vs. Exploitation: An Empirical Test of the Ambidexterity Hypothesis
by Zi-Lin He and Poh-Kam Wong, was one of the articles that we decided upon, not to use in
our meta-analysis. The reason why we did not include this paper is primarily because of the
use of a different method for representing the outcome of the research. The method used
here is regression, while correlation is the method used in all the other articles. The
confusing with this article is that the control of the survey is shown using correlation, while
all the hypotheses are represented using regression.
The researchers measured this by using a survey about the innovation behaviour and firm
performance of 2822 manufacturing firms in Singapore and Malaysia. The high Cronbachs
Alpha for the scale ( = 0.807 and = 0.752) indicates a good scale construction and precise
measurement. The sampling frame was constructed from the databases provided by the
Economic Development Board of Singapore and Penang Development Corporation.
Questionnaires were sent to the CEOs of these firms. Responses with missing data and
doubtful or contradictory answers that could not be clarified were removed from the
sample. Eventually the valid sample size for this study was 206. Its finds that the
interaction between explorative and exploitative innovation strategies is positively related to
sales growth rate. (He and Wong, 2004) and it also finds that the relative imbalance
between explorative and exploitative innovation strategies is negatively related to sales
growth rate. (He and Wong, 2004).
While the research itself was set up in a way that was definitely useful for our research, we
decided not to include this paper. The method used in this article, regression, does not
correspond to all the other articles which we have found. Hence we do not use this article in
the meta-analysis.
Exploration Activities & Firm Performance
42
Appendix B1. Balancing Exploration and Exploitation: The Moderating Role of
Competitive Intensity
This article, which is written by Seigyoung Auh and Bulent Menguc and contains a cross-
sectional study on the contingency role that competitive intensity plays in explaining the
relationship between exploration/exploitation and firm performance. (Auh and Menguc,
2005) The study is considered to be cross-sectional because 980 sample firms (i.e., their
CEOs) where approached using a questionnaire at one specific point in time. Subsequently,
firm performance can be further subdivided into firm performances effectiveness and
efficiency. It is important that within this analysis we will concentrate as much as possible on
(1) exploration activity and (2) effective firm performance. Also, although the paper suggests
different relationships regarding prospectors and defenders, this analysis will be
concentrated only on defenders.

The focal unit used in this hypothesis can be derived as defender. The paper defines this
term hardly, and readers are only introduced superficially to it. Looking for a better
definition in a paper that is written by the developers of the term, this defines that: The
defender (i.e., its top management) deliberately enacts and maintains an environment for
which a stable form of organization is appropriate. (Miles et al., 1978) This definition also
links the defender (which is the focal unit) to its units of analysis: companys top
management, which is used as well by Auh and Menguc. However, despite the fact that the
term defenders seems to be applicable for all defenders in the world, in all sectors and at
all times, only by reading very carefully the papers Research Method section and/or the
Limitations and Future Research section can be concluded that the defender are only
represented by Australian firms that are active in manufacturing industries. This means that
the domain is considerably smaller than the writers try to insinuate. Therefore, the entire
population in this research would be better defined as: all Australian firms that are operating
in the manufacturing industries. If subsequently is taken a close look to the different
variables used in the research there can be found a clearly stated dependent variable (DV):
effective firm performance, and also an independent variable (IV): exploration.


Exploration Activities & Firm Performance
43
Table A1. Copy of Table 2 of the article Balancing Exploration and Exploitation: The Moderating Role of Competitive
Intensity. (Auh & Menguc, 2005)

When taken a closer look to the research results that are published in the paper (see table
above), there can be found an effect size concerning our main hypothesis. (Auh and Menguc,
2005) This effect size is denoted as a correlation coefficient (r) which carries a value of 0.70
for the association between the two variables. Since the correlation is basically a
standardization of the covariance, it concerns a standardized, but unit-free measurement.
From statistical software that was provided, it was possible to obtain the confidence
intervals (CIs) for this correlation. The lower confidence interval is 0.667 and the upper
confidence interval is 0.731. This suggests that there is a moderate to high likelihood of a
positive association between the two variables. Nevertheless, despite the fact that an effect
size for the hypothesis is provided, the writers do not use it for the evaluation of the results.
Instead they use the t-value and a significance test for the evaluation, something which is
not supported in the literature of the course and which is even defined as a fallacy of the
slippery slope of (none) significance. (Hak, 2013: 19; Cumming, 2012: 28-32)

Notably, the writers use the term relation in the description of their findings: We found
that at high levels of competitive intensity exploration was not related to firm performance
(). (Auh and Menguc, 2005) Although this could suggest a causal formulation, they do not
explicitly confirm this possible causal nature in the text. And they should not have done this
either. The cross-sectional research strategy is not able to find causality, merely association.
Therefore, they could have better used the term association in their hypothesis and
Exploration Activities & Firm Performance
44
description of the findings. However, the effect size measure is consistent with the cross-
sectional research strategy. Only the verbal formulation of the hypothesis and the
description of the findings could have been described more accurate to avoid
misinterpretation. The difference between our interpretation and the one of the writers is
the measures used. The writers based their conclusions exclusively on significance testing
and interpretation of the t-value.
Since the managerial relevance of this thesis general research question concerns the
difference in a firms performance when or not associated with exploration activities (see
the introduction of this synthesis), it is important to take a close look at the population that
is studied and the characteristics of it. This paper contains 980 sample firms which are all
represented through their CEOs. This is well within the theoretical domain of the central
hypothesis. Since this is just a part of the total population it can be concluded that it
concerns a sample study instead of a census study. This sample was drawn from a masters
list of 1000 firms operating in a variety of manufacturing industries in Australia from a
leading market research/databank company. (Auh & Menguc, 2005) Despite the fact that
the sample for the pre-test was randomly selected from this masters list, the purchasing of
such a list itself is a sign of that this sample is not a probability sample. The most important
reason for this is that the population behind the sample is not exactly specified. There is only
specified that the masters list is including Australian manufacturing firms. Additionally, also
the possibility of nonresponse was tested: The likelihood of nonresponse bias was tested by
splitting the total sample into two groups; those received before the second wave of mailing
and those received after the second wave. (Auh & Menguc, 2005) A comparison of both
groups by using a t-test showed no significant differences.

Furthermore, the validity and reliability of the measurements of both the dependent and the
independent variable should be mentioned. The validity of exploration and firm
effectiveness was measured trough Cronbachs Alpha, which is a measurement of internal
consistency. For exploration (within the group of defenders) the alpha was 0.88 and for
effective firm performance this was 0.71. According to the rule of thumb, an alpha above
0.70 indicates an internally consistent scale. (Van Dalen, 2014) Thus can be concluded that
both variables are measured validly. Additionally, there is conducted a confirmatory factor
Exploration Activities & Firm Performance
45
analysis (CFA) that judges both the inter-item reliability and validity of the multi-item scales.
(Auh and Menguc, 2005) Since both variables are quantitative scores, the CFA could be
applied to both exploration and effective firm performance. Also, the average variance
extracted (AVE) results were checked to be at least 0.50 and the writers ran a check
regarding the overlap of different important concepts: a hierarchical moderated regression
analysis to avoid the possible multicollinearity. (Auh and Menguc, 2005) All results were
perceived to be good and accurate. As to speak of the accuracy of the measurement, both
exploration and firm effectiveness were fixed amounts that could be derived from the
companys financial reports. Since these reports are externally checked by accountants,
these can assumed to be accurate. The respondents of the surveys, the firms CEOs, were
chosen because of the profound knowledge these people have about the company.
However, it is important to note that despite the fact that the survey results were treated
anonymously- the answers of the CEOs could have been somewhat flawed. They are not able
to give answers that are 100 per cent reliable and objective. However, at least these CEOs
are representative respondents regarding the theoretical domain.

The study by Auh & Menguc does not make any claims beyond the studied population.
When there is referred to the results, these are only implied with regard to the cases
investigated. The writers do well by not generalizing the results to the all firms in all
industries. Since this study is conducted among Australian manufacturing firms and the
researchers did not make use of a series of studies there can be concluded that the
theoretical domain is heterogeneous. Unfortunately, possibly due to the specific selection of
the theoretical domain, the results of the study are not compared with those from other
studies. Due to the research method used (cross-sectional), the effect size does not say
anything about the possible causal nature. Therefore, it has relatively little managerial
relevance. On the other hand, there is found to be a significant correlation which suggests
that there is an association between the two variables.
Exploration Activities & Firm Performance
46
Appendix B2: The Influence of Founding Team Company Affiliations on Firm
Behavior
This article, which is written by Christine M. Beckman (2006), and contains a study on the
association between shared previous work environments and a companys engagements in
exploration and exploitation activities. Exploration and exploitations capture a wide variety
of firm actions and behaviors (Beckman, 2006). To fully understand to which extent this is
embedded in an organization, the research opens the question of evaluating managers
backgrounds to see whether shared working experiences might have an influence on firm
behavior. Especially founding teams, so the collection of managers that came up with the
idea to start a business, form the native behavior that will be shared within the whole
organization.
In this study, the Beckman examines groups of early executives that comprise firms
founding teams and argue that their prior experiences predispose firms to engage in
explorative or exploitative behaviors. In a broader sense, this view suggests that team
composition both informs and constrains later firm action. Affiliations are important because
the past companies in which managers have worked offer employees models for what an
organization should look like and how it should act (Beckman, 2006). The focal units of all of
the hypotheses are the founding team, which is the same as the unit of analysis in the study.
The founding teams were mapped by interviewing and surveying, supplemented with
archival data. To eliminate possible errors in the unit of analysis, the researcher removed the
data companies that could give a wrong insight. For example, companies with only one
founder couldnt give the same information as companies that are founded by teams of two
or more founders.
The independent (IV) and the dependent variable (DV) are formulated in the article itself.
The independent variable is set as the diverse prior company affiliation and the firm
performance as the dependent variable. Furthermore, to add more consistency and
overview, the following control variables were added to the research: Industry, Venture
capital, Firm controls and Team controls
The results were displayed as significant, despite the reduced number of observations (given
a non-exact p-value). Moreover, there were not any confidence intervals portrayed or
Exploration Activities & Firm Performance
47
calculated, but the effect sizes were displayed in an orderly manner, showing all variables
and their measurements. There are several effect sizes that were used to show a relation.
Some of the non-standardized ESs, portrayed with their mean, SD, minimal and maximum
and corresponding correlation coefficients are Idea change rate, Top management team size,
Firm age, Firm growth and Proportion. The variables that we checked for our interest in the
relationship between firm performance and exploration activities are: Exploration strategy
and Venture capital financing (r = 0.19). From statistical software that was provided, it was
possible to obtain the confidence interval (CIs) for this correlation. The lower confidence
interval is 0.024 and the upper confidence interval is 0.346.
Table A2. Copy of Table 1 in the article (Beckman, 2006)

Besides non-standardized, the research also included the Pseudo-R2, which is standardized.
Therefore, both effect size types are used but there are more non-standardized types used
than the standardized types. Unfortunately, there arent any confidence intervals presented.
We tried to look at the given p-values to get more information but failed due to the fact that
the p-values are not exact but merely statements. Therefore, we can say that the authors
might tend to use superfluous information in their reasoning. Because these are merely
statements, we cannot conclude what the actual CIs are with our current understandings of
the CI calculations. The results demonstrate that founding teams whose members have
worked for some of the same prior companies are more likely to pursue an exploitation
strategy and less likely to pursue an exploration strategy, whereas founding team members
from different prior companies are more likely to support an exploration strategy.
Exploration Activities & Firm Performance
48
Furthermore, the results offer some evidence that firms whose founders have both common
and diverse prior affiliations are more likely to grow (Beckman, 2006).
The interpretation of the effects, show that the researcher concluded that all three of the
hypotheses are supported by the data, but we are skeptical about the fact that they are
giving causal clauses while this research is set up as a cross sectional research and the fact
that significance testing was a big part of this research. The effect sizes themselves were
focused on the correlations, which is consistent with the research strategy. As the results do
show their p-values, we can say that the results depend on their significance value. Due to
their non-exact nature instead of an exact number, we cannot say much about these p-
values as the actual p-value might differ in value. We would have liked to see more
estimation or exact data to give a better insight in the overall research. (Cumming, 2012)
The data was drawn from more than 170 young Sillicon Valley companies and the sample
focused on a subset of high-technology industries. To get the information, interviews,
surveys and archival data was collected from a final sample of 141 companies. The
eliminated companies were because of missing data (14 companies) or due to the fact that it
was set up by a single entrepreneur (18 companies). There was no other information
whether or not a probability sample was used or if there was. The dependent and
independent variables were measured using the data from well-known databanks to control
the trustworthiness of the information. Besides the internal control between the variables,
the researchers did say that they used T-tests to check certain relations; they did not use any
method to show the consistency in their data collection. What they did highlight was the
way the data from the interviews was used. They used specific coding procedures to make
sure that they were consistent in the handling of all of the information. As these techniques
are new to us, we could not use them to evaluate whether the techniques being used are
appropriate. (Beckman, 2006). The measurements do rely on informants as they used
questionnaires to get some of the data. They did not portray anything of importance
pointing out the trustworthiness of the respondents. Also, when checking the validity of the
research, we did not find any of the common measures to accompany the construct or
divergent validity. We checked the paper for the CVI-values, the RMSEA, CFI, TLI and the
SRMR. Therefore, we cannot conclude whether the measures are as valid as they are
portrayed.
Exploration Activities & Firm Performance
49
The inter-item reliability can be checked with the use of the Cronbachs Alpha or Rho, but
neither of them could be found in the paper. Therefore, as well as the validity, there cannot
be concluded whether the inter-item reliability is according to the rule of thumb ( > 0,7). The
accuracy can be checked by looking at the way they measured/obtained their data. As they
wanted to know the effect of founding teams, the way they got their data did not pose a
direct threat to the accuracy. The managers involved are all coming from a company with a
founding team and a manager is a good source to ask for his background and likelihood to
act in certain ways. To back this up, the archival data can check for inconsistencies that
arisen from the data received during interviews or questionnaires.
The author does claim that the results are likely to be applicable beyond the population. The
paper states that there was no control variable for industry, but merely it was used to
maintain consistency with earlier models. The theoretical domain is not specifically
mentioned to be homo- or heterogeneous. But, as the results are compared with prior
research, as mentioned in the contributions part of the report, and the way the report is
saying that the differences in results are because of the unique attributes of each research
and the population, we can conclude that they tend to see the population as heterogeneous.
The differences between the measured effect sizes between the different studies are then
used to say something about what actually gives the best result looking at the research
question. The practical relevance is, to our own idea, merely another insight in what might
tend to show the relationship of team affiliation and firm growth. They show that previous
research has put out some initial oversights of what may be the best factor to see if a
company is likely to have a decent firm growth, but add another layer of information trying
to surpass previous research and stating that their findings are the best way to see what is
linked to firm growth and what not.
Exploration Activities & Firm Performance
50
Appendix B3: Unpacking Organizational Ambidexterity: Dimension,
Contingencies, and Synergistic Effects
This report is about the construct of organizational ambidexterity. Ambidexterity refers to
the ability of an organization to be efficient in its management of today as well as exploring
net opportunities (Duncan, 1976). Organizational ambidexterity is composed of two relative
dimensions: one relating to the balance between exploration and exploitation, the balance
dimension of ambidexterity (BD), and the other pertaining to their combined magnitude,
the combined dimension of ambidexterity (CD) (Cao et al., 2009). The research strategy is
cross-sectional by using surveys that were sent to 200 small- and medium-sized enterprises
(SMEs) high-tech parks in China in the middle of 2006, of which eventually 122 would
participate in the research and met the criteria.
To use this report for our own research we focus solely on the relationship between
exploration and firm performance. The writers define the concept of exploration according
to an earlier definition by March (1991), and use exploration involves searching for new
knowledge and opportunities, to formulate exploration. To measure the firm performance,
Cao et al. (2009) used the scale of Gupta and Govindaran (1986) and asked CEOs to rate,
on a 17 Likert scale, their firms performance over the last 12 months in terms of sales
growth, profit growth, market share growth, operational efficiency, cash flow from market
operations, and market reputation. (Cao et al., 2009). The unit of analysis of this paper is
somewhat different from the focal unit of our hypothesis. As described above, this paper is
about small to medium-sized enterprises, while our paper is about all firms in the world, in
all economic sectors, in all countries. Even though this research was conducted in China, the
authors of the article do not insinuate that their findings are limited to this area. Although,
the authors of this article did recommend that the research must be expanded to larger
firms and other geographic areas as well.
When looked at the variables of this paper, there can be concluded that the independent
variable and the dependent variable of this article match with the dependent and
independent variable of the main research hypothesis. Both are about the exploration
strategy and the firm performance of a company.
Exploration Activities & Firm Performance
51
When taken a closer look to the research results that are published in the paper (see table
below), there can be found an effect size concerning our own research hypothesis. This
effect size is denoted as a correlation coefficient (r) which carries a value of 0.311 for the
association between our variables. Since the correlation is basically a standardization of the
covariance, it concerns a standardized, but unit-free measurement. From statistical software
that was provided, it was possible to obtain the confidence intervals (CIs) for this correlation.
The lower confidence interval is 0.139 and the upper confidence interval is 0.346. This
suggests that there is a little likelihood of a positive association between the two variables.
Table A3. Copy of Table 2 of the article (Cao et al., 2009).

When we take a look at all the information provided, the report presents all the relevant
information. The analyses and results section gives an effect size using the correlation, what
makes the effect size parameters consistent with the research strategy (Hak, 2013). Notable
is that the report also gives superfluous information. Besides the report gives the effect size,
it also makes some notes about the significance of the results in the robustness test. The
report presents a cross-sectional study. A cross-sectional study consists of a data collection
from a population or (random) sample at one moment in time. But according to the
Research Training and Bachelor Thesis course book, a cross-sectional study has the
lowest level of internal validity for generating evidence regarding a causal effect (Hak,
2013). A positive fact is that the writers admit that it is a cross-sectional study, they say:
we also note that, given the cross-sectional nature of this study, we have not been able to
explore how a firms exploratory and exploitative tendencies, or ambidextrous orientation,
develop over time. (Cao et al., 2009). Another positive fact is that the writers (in
contradiction to almost all other researchers), use the term association to describe the
effect of exploration on strategic performance. This means that the writers want to indicate
Exploration Activities & Firm Performance
52
and emphasize that cross-sectional research can absolutely not imply a causal relationship.
And above that, it shows professionalism and accuracy.
The delivered questionnaires to a total of 200 randomly selected firms through park
administrative offices from the high-tech parks. Because not all the high-tech small to
medium-sized enterprises firms from the three economic zones were selected, this study
covers a sample of the population. The population is within our theoretical domain, since we
include all firms in the world, in all economic sectors, in all countries, at all times. The writers
do not give us the information to find out whether the selected companies are from a
complete list of the population or not. According to Hak (2013) such list is do not count as
probability sample. He also mentioned that a requirement for the application of
inferential statistics in a data set is that the sample is complete. (Hak, 2013).
As mentioned above, the researchers delivered questionnaires to a total of 200 randomly
selected firms. The final sample consists of 122 firms. The response rate is therefore
122/200=61%. They also assessed nonresponse bias by searching for differences in early and
late response. When we look at the data measurement method, the respondents from this
research were the CEO and CTO. They selected the CEO as the respondents because We
selected the CEOs as the respondents because the CEO is likely to be the most
knowledgeable informant about a firms strategy and performance (Cao et al., 2009). And
to eliminate single-source bias, they also collected the same measures for the CTO. But we
expect a little distorted picture of reality, because they had to assess their own firm.
Furthermore, the validity (inter-item reliability) of the measurements of both the dependent
and the independent variable should be mentioned. The validity is checked with the aid of
the internal reliability. They calculated the Cronbachs alpha for each construct, and found
that all of them exceeded the 0.7 level. As mentioned above, the writers used multiple
respondents per firm to eliminate single-source bias and found that the ratings were highly
correlated with each other. But according to Hak (2013) using informants is always a threat
to (inter-item) reliability.
When we look at the conclusion and the claims made in the paper from Cao et al., we can
conclude that the study does not make any claims beyond the studied population. The
writers state that One boundary condition for our study pertains to the generalizability of
our findings beyond the population from which our sample firms are drawn. (Cao et al.,
Exploration Activities & Firm Performance
53
2009). When there is referred to the results, these are only implied with regard to the cases
investigated. Because the researchers did not make use of a series of studies there can be
concluded that the theoretical domain of the study is heterogeneous. Unfortunately, the
results of the study are not compared with those from other studies. The writers state that
there are different operationalizations of ambidexterity which has made it difficult to
compare results across studies and amass a core set of findings on which to build. (Cao et
al., 2009). The researchers found a significant correlation which suggests that there is an
association between the two variables, especially for Chinese small- and medium-sized
enterprises. But due to its cross-sectional nature, the research has relatively little managerial
relevance.

Exploration Activities & Firm Performance
54
Appendix B4: Exploratory Innovation, Exploitative Innovation, and
Performance: Effects of Organizational Antecedents and Environmental
Moderators
This article is written by three researchers from ERIM (Erasmus Research Institute of
Management) and tries to uncover different possible relationships or effects using the
independent variables exploratory innovation and exploitative innovation and the
dependent variable of firm performance. At the same time the article is examining different
moderating variables regarding the effectiveness of the independent variables. It finds that
centralization negatively affects exploratory innovation, whereas formalization positively
influences exploitative innovation. (Jansen et al., 2006) And it also finds that pursuing
exploitative innovation is more beneficial to a units financial performance in more
competitive environments. (Jansen et al., 2006) But the most interesting part for us is that
also the relationship between exploratory innovation and firms financial performances is
measured. This provides us with possible valuable information. The dependent variable will
be financial performance and the independent variable will be exploratory innovation.
The focal unit in this hypothesis is organization. Because the research is conducted among
large European financial service firms, this entity matches the focal unit in the hypothesis.

Furthermore, the paper defines exploratory innovation: Units that engage in exploratory
innovation pursue new knowledge and develop new products and services for emerging
customers or markets. (Jansen et al., 2006) Due to absence of a good measure for
exploratory innovation in the existing literature, the writers constructed a group of firm
characteristics to measure the variable. The high Cronbachs Alpha for the scale ( = 0.86)
indicates a good scale construction and precise measurement. Financial performance on the
other hand was measured through internal corporate records by a units average
profitability from 2003 up to one year after the measurement of exploratory and
exploitative innovation. (Jansen et al., 2006)





Exploration Activities & Firm Performance
55
Table A4. Copy of Table 1 of the article Exploratory Innovation, Exploitative Innovation, and Performance: Effects of
Organizational Antecedents and Environmental Moderators. (Jansen et al., 2006)

As marked in the table above, which is derived from the actual paper, the correlation
coefficient for the association between exploratory innovation and financial firm
performance is r = 0.18. Since the correlation is basically a standardization of the covariance,
it concerns a standardized, but unit-free measurement. The closer this number is to 0 (which
is the case here), the weaker the amount of association is. From statistical software that was
provided, it was possible to obtain the confidence intervals (CIs) for this correlation. The
lower confidence interval is 0.064 and the upper confidence interval is 0.291. There is a
weak to moderate likelihood of a positive association between the two variables.

Finally, it can be concluded that there might be a positive, but very weak association
between exploration innovation and financial firm performance. The writers of the paper did
not explicitly look for this association since they were concentrating mainly on moderating
variables by using multivariate regression analyses. However, they report the figures and
drew conclusions on their own specific hypothesis by using the superfluous p-values instead
of confidence intervals. This can be considered a weakness because a confidence interval
reporting is known to give more specific information. Lastly, the research is cross-sectional
but data was collected through internal corporate records and the temporary separation of
the independent and dependent measures. (Jansen et al., 2006) According to the Research
Training and Bachelor Thesis course book, the preferred research strategy for studying an
association is a cross-sectional study (Hak, 2013) However, the same course book states
that this kind of research strategy absolutely cannot assess the presence of a causal
Exploration Activities & Firm Performance
56
relationship. So by interpreting this knowledge, this paper can be used only to discover
(linear) association, assuming that not another variable intervenes with this association.
Furthermore is the research conducted among 283 organizational units from 115
autonomous branches of a large European financial service firm. However, this is not
implied. The writers use the terms relation several time in the description of their findings.
For the papers methodological correctness it would have been better to replace
relation(ship) with association.

Since the managerial relevance of this thesis concerns the difference in a firms
performance when or not associated with exploration activities (see the introduction of this
synthesis), it is of notable importance to take a close look at the population that is studied in
this paper and the characteristics of its population. The paper contains -like stated earlier- a
sample of 283 organizational units from 115 autonomous branches of a large European
financial service firm. These branches were all represented by their respective managers.
Since the 115 branches can be considered separate firms, the sample lays within the
theoretical domain of the central hypothesis. Since this is only a part of the total population
the study regards a sample study instead of a census study. The sample was drawn from a
large European financial services firm and thus can absolutely not be considered as a
random sample. The whole population from which the sample is drawn is not described
clearly in the paper and thus can the observed effect sizes not be linked to differences in
the characteristics of the population. (Hak, 2013) Because the possibility of nonresponse is
present, the writers tried to measure this through examining the differences between
respondents and non-respondents for the final sample. (Jansen et al., 2006) The
corresponding t-test did not show significant differences.
Furthermore, the validity (inter-item reliability) of the measurements of both the dependent
and the independent variable should be examined. The validity of exploratory innovation
was measured through Cronbachs Alpha (0.86), which is well-above the rule of thumb of
0.70 that is discussed earlier. (Van Dalen, 2014) The financial performance was measured by
looking at the corporate records from 2003 up to one year after the measurement of
exploratory and exploitative innovation. (Jansen et al., 2006) These performances were
adjusted to evaluate each organizational unit, by using a units profitability-achievement
Exploration Activities & Firm Performance
57
rate. (Jansen et al., 2006) After this adjustment the financial performance could be assumed
valid and reliable (because it was directly derived from the corporate financial statements).
However, in order to secure the reliability of exploratory innovation the writers conducted
an exploratory factor analysis and investigated the correlations between exploratory and
exploitative innovation at the branch level. (Jansen et al., 2006) Both were perceived
positive. The respondents of the surveys, the managers of different branches, were chosen
because of the profound knowledge these people have about their respective branches.
However, it is important to note that despite the fact that the survey results were treated
anonymously- the answers of the CEOs could have been somewhat flawed. They are not able
to give answers that are 100 per cent reliable and objective since they can feel the urge to
report positively about their own branches. However, these managers are representative
respondents regarding the theoretical domain in which they operate.
The study by Jansen et al. does not make any claims beyond the studied population.
However, it does make claims to have found relations instead of associations, which is
perceived to be a critique since cross-sectional research is never able to imply causality.
When there is referred to the results, these are only implied with regard to the cases
investigated. The writers do well by not generalizing the results to the all firms in all
industries. Since this study is conducted among units from 115 autonomous branches of a
large European financial service firm and the researchers did not make use of a series of
studies there can be concluded that the theoretical domain is heterogeneous. Fortunately,
the results of the researchers are intensely compared with previous studies. Most of the
comparisons made are underscored by the writers research (such as the association
between centralization and exploration activities to name an example). The research has
relatively little managerial relevance due to its cross-sectional nature. On the other hand,
there is found to be a significant correlation which suggests that there is an association
between the two variables. It probably also has relatively high managerial relevance for
companies in the banking business because the population used is derived from this
industry.

Exploration Activities & Firm Performance
58
Appendix B5: Exploitation, Exploration, and Firm Performance: The Case of
Small Manufacturing Firms in Japan
This article, which is written by Takehiko Isobe, Shige Makino and David B. Montgomery,
displays the results of a study that investigates the relationship between technological
capabilities. (Isobe et al., 2004) Within the concept of technological capabilities can be
divided into two types: exploitation and exploration. The research strategy is cross-sectional
by using surveys that were sent to 917 small to medium-sized manufacturing firms in Japan
(i.e., their presidents), of which eventually 302 would participate in the research. In the
paper, the writers define the concept of exploration according to an earlier definition by
March in 1991 as: the development of a new competence base by the acquisition of new
resources from external sources. (March, 1991) And subsequently that: exploration
involves the acquisition of new information about alternatives and thus leads to the
improvement of future (long-term) performance. (March, 1991) Accordingly, with regard to
the definition of performance the paper uses two distinct performance variables, being:
operational efficiency and strategic performance. (Isobe et al., 2004) Operational efficiency
represents short-term performance, which is reflected in productive efficiency and financial
profitability. Strategic performance represents long-term performance, which is reflected in
new technology and product development. (Isobe et al., 2004) In the critical synthesis of
this paper, we will use strategic performance for the investigation of the association
between exploration and performance.
A very positive and notable fact is that the writers do not try to insinuate that their findings
are generalizable for all firms, all over the world. This can be derived from the title alone
which clearly states that the results imply for small manufacturing firms in Japan. Therefore,
the population can be defined clearly as all small and medium (technological)
manufacturing firms in Japan. When taken a closer look to the research results that are
published in the paper (see table below), there can be found an effect size concerning our
hypothesis in table 6. This effect size is denoted as a correlation coefficient (r) which carries
a value of 0.74 for the association between our variables. From statistical software that was
provided, it was possible to obtain the confidence intervals (CIs) for this correlation. The
lower confidence interval is 0.684 and the upper confidence interval is 0.787. Since the
correlation is basically a standardization of the covariance, it concerns a standardized, but
Exploration Activities & Firm Performance
59
unit-free measurement. This suggests that there is a moderate to high likelihood of a
positive association between the two variables.

Table A5. Copy of Table 1 of the article Exploitation, Exploration, and Firm Performance: The Case of Small
Manufacturing Firms in Japan. (Isobe et al., 2004)

A very positive fact is that the writers also use exclusively these Pearson correlation
coefficients for the interpretation of their results. This is noteworthy because in most papers
the researchers tend to rely on superfluous p-values. However, these values used in
significance testing- are not used for the interpretation in the results here. So the writers of
the paper interpret the findings in the same way as is done in this critical synthesis. Another
positive fact is that the writers (in contradiction to almost all other researchers), use the
term association to describe the effect of exploration on strategic performance. This means
that the writers want to indicate and emphasize that cross-sectional research can absolutely
not imply a causal relationship. And above that, it shows professionalism and accuracy. They
write the following: These results strongly support Hypotheses 1 and 2, which predict
positive associations between exploitation and operational efficiency (Hypothesis 1) and
between exploration and strategic performance (Hypothesis 2). (Isobe et al., 2004)
Additionally, also in the hypothesis the writers describe only a possible effect but no causal
claim is made. The research strategy with its corresponding effect size (i.e.; Pearsons
correlation coefficient) is not able to insinuate such a claim and thus did the researchers
make the right decisions.
Exploration Activities & Firm Performance
60
Since the managerial relevance in this critical synthesis general research question concerns
the difference in a firms performance when or not associated with exploration activities
(see the introduction of this synthesis), it is important to take a close look at the population
that is studied and the characteristics it has within this paper. For the analysis in the paper
there were used 302 small to medium-sized manufacturing firms which were all represented
through their presidents. This is well within the theoretical domain of the central hypothesis.
Since these firms are taken from a large population of manufacturing firms within an
association, it concerns a sample study rather than a census study. Since the sample was
taken from a larger amount of possible cases that was derived from the Osaka Industrial
Association (OIA), there can be concluded that the selection of the cases from the
population was not formed through probability sampling. (Isobe et al., 2004) The population
in this case could possibly be described as: all Japanese small to medium-sized
manufacturing firms. However, this is not specified in the paper. This suggests that that
there are also a lot of manufacturing firms that are not a member of the OIA and therefore
if the population had been described precisely- the list with members could would have
been the sampling frame. However, when the population would have been described as:
all Japanese small to medium-sized manufacturing firms that are a member of the OIA, the
sample would have been valid. Regarding the possibility for nonresponse, the writers used
the nonresponse bias detection method by Armstrong and Overton, with comparisons
between several key variables for the earlier and later respondents in our sample were
made. (Isobe et al., 2004) The corresponding t-tests indicated that there were no significant
differences between the groups and therefore the nonresponse bias can be ignored. (Isobe
et al., 2004)
Furthermore, the validity (inter-item reliability) of the measurements of both the dependent
and the independent variable should be mentioned. The validity, which is equal to internal
reliability was checked as follows: To assess internal reliability, we calculated the
Cronbachs alpha for each construct, and found that all of them exceeded the 0.7 level that
is recommended by Nunnally (1978). (Isobe et al., 2004) The alphas for both exploration
(independent variable; alpha = 0.84) and for strategic performance (dependent variable;
alpha = 0.79) are considered to be very consistent. Subsequently, the hypotheses were
checked for reliability by the use of a complementary factor analysis. The writers state:
Exploration Activities & Firm Performance
61
This method allowed us to identify the effects of both exploitation and exploration on firm
performance. (Isobe et al.,2004) The results from this analysis conclude an excellent fit
and were further analyzed by using statistical software called LISREL. (Isobe et al., 2004)
Therefore, the results are reliable.
The respondents, as stated earlier, were the respective presidents of the selected firms.
These people were chosen because of the profound knowledge about the firm they possess.
As stated by the writers: Small to medium-sized firms tend to have a relatively limited
number of core products or technologies, and thus managers are likely to have a good
understanding of the key technologies of the firm and their impact on the firms core
competencies, which thus enhances the accuracy of the responses. (Isobe et al., 2004)
However, it remains important to note that like in previous analyses of cross-sectional
research using surveys- the answers of the presidents could have been somewhat flawed.
They are not able to give answers that are 100 per cent reliable and objective due to the fact
that they are not objectively observing the firms activities. However, at least these
presidents are representative respondents regarding the theoretical domain and contain the
knowledge that is required to provide the information that is needed.

The paper by Isobe et al. does not make any claims beyond the studied population. A
noteworthy fact is that the writers even stressed this by putting in the papers title that the
research concerns only Japanese Manufacturing firms. When there is referred to the results,
these are only implied with regard to the cases investigated. Another compliment towards
the writers is that they explicitly refer to association instead of effect (or even worse
relation). The writers do well by not generalizing the results to the all firms in all industries.
Since this study is conducted among units from 302 small to medium-sized manufacturing
firms in Japan and the researchers did not make use of a series of studies there can be
concluded that the theoretical domain is heterogeneous. Fortunately, also here the results
of the researchers are compared with previous researches regarding different aspects and
concepts. The research has relatively little managerial relevance due to its cross-sectional
nature. It would be especially relevant for Japanese manufacturing firms. On the other hand,
there is found to be a significant correlation which suggests that there is an association
between the two variables.
Exploration Activities & Firm Performance
62
Appendix B6: Balancing Exploration and Exploitation in Alliance Forming
This article, which is written by Dovev Lavie and Lori Rosenkopf, displays the results of a
study that investigates the relation between alliance forming, exploration and exploitation.
They argue that most of the merits of balancing conflicting needs for exploration and
exploitation have been mainly incorporated in simulation studies. (e.g., Levinthal, 1997;
Rivkin & Siggelkow, 2003). The research strategy is a pooled time series analysis of alliances
formed by U.S. Software firms by using an initial sample that included all 547 publicly traded
U.S. based firms that were active in 2001. The data was drawn from records, kept by the
Securities Data Corporation, for each firm between 1985 and 2001. Besides the SDC data,
they also checked the corporate websites and used information from the Security Exchange
Commission SEC and the Edgar database. (Lavie and Rosenkopf, 2006).
The writers of the papers are categorizing the alliance formation in certain domains to
investigate their relation with exploration and exploitation. They question the following: (1)
Which activity is likely to dominate in each domain? and (2) How can firms balance their
exploration and exploitation activities when forming alliances? (Lavie and Rosenkopf,
2006) Furthermore, the authors operationalized exploration and exploitation with separate
indicators, which makes it more usable for our own research to look at the relation between
the exploration activities and firm performance. The dependent variables were formed of
three types of exploration: Function, Structure and Attribute exploration. The independent
variables were formed of the exploration experience within each domain for each year and
the measures in which year the alliance started, mainly to test their hypothesis one and two.
(Lavie and Rosenkopf, 2006) As these hypotheses are not aimed at the same relation that we
are looking for, we looked beyond their original hypotheses as this research does include
both the variables that we are looking for (i.e.; exploration and firm performance), which are
both measured with multiple indicators in the research. The focal unit in the study is
alliance, which is tested with the help of the firm year (the unit of analysis). The results
correspond since the studys sample, after deduction of non-alliance firms, only consists of
firms with alliances within the time parameters. The authors state that the results can be
seen for the whole IT industry as the U.S. Software firms form the majority of all software
firms in their respected branches. They therefore are insinuating generalisation with a
plausible cause.
Exploration Activities & Firm Performance
63
Looking at the results, the effect size that we will be using is denoted as a correlation
coefficient as they used these as well for their own IV and DV. As they have multiple
indicators for firm performance and exploration, we mainly used firm profitability (8) and
Function exploration experience (11) (r = 0.050). As this is a standardized measurement, we
can suggest that there is a very small likelihood of a positive association between these two
variables. From statistical software that was provided, it was possible to obtain the
confidence intervals (CIs) for this correlation. The lower confidence interval is -0.034 and the
upper confidence interval is 0.133.
Table A6. Copy of Table 2 of the article Balancing Exploration and Exploitation in Alliance Forming. (Lavie and
Rosenkopf, 2006)

The researchers did however use p-values and are also using them while interpreting the
results. Therefore the writers might tend to rely too much on superfluous information. As a
convenience for ourselves, the researchers also stated the relation between function
exploration (11) and profitability (8) themselves, stating that there is a positive relation (r =
0.05) which confirms our own findings in their effect sizes. (Lavie and Rosenkopf, 2006) This
was helpful as their hypotheses were not aimed at this at all. The general hypotheses that
they set up do have a certain causal claim in it, but as this research is set up as a timed series
analysis, it is possible to do so. As the correlations show, over a time of several years, they
provide detailed data to support their claims. As the effect sizes are measured on the basis
of their respected years, these measures are consistent with their research strategy.
The population consisted of U.S. bases Software companies. They initially selected 2,777
publicly traded partners that accounted for more than 60% of the alliances to limit potential
biases. (Lavie and Rosenkopf, 2006) All firms that were not engaged in an alliance were kept
Exploration Activities & Firm Performance
64
out of the research to enlarge the measurements validity. Concluding, the population
consisted of a well-defined sample of which the missing cases were selected and kept out
of the research. We have not found any information indicating the use of a probability
sample, or if there were cases of non-response and how they treated these. The
independent and dependent variables were measured using the data from highly trusted
sources as mentioned earlier. There wasnt any information whether information was being
passed on through people that may give their own twist to certain data. On a personal basis
that might have brought in more risk than wanted. Therefore we can conclude that the way
the information was obtained was trustworthy due to the face that they executed an
extensive archival research using trustful data archives.
To back up the trustworthiness of the data, the data was collected during a time span of 15
years, including extra research on a 5 year period from 1985 till 1990 to add the extra data
that was missing as some of the databases did not exist or were not used for the firms being
researched. Thus, there is provided a lot of historical and current data to enable accurate
measurements. (Lavie and Rosenkopf, 2006) The validity of the measures was not reported
with the CVI-values, the RMSEA, CFI, TLI or the SRMR values, by which we cannot conclude
whether the acclaimed validity of their research is valid. They did however stated that they
used the same random-effects models that were used in prior research, thus enlarging the
validity as these measures are likely to be checked already. For the inter-item reliability we
could not find the use of Cronbachs Alpha or Rho to which we also have to conclude that
the inter-item reliability of the research remains something that we need to be skeptical
about. (Lavie and Rosenkopf, 2006) The claims made in the report remained within the
boundaries of the studied population. As they used the majority of large U.S. software firms,
that are representative for their whole population, they do not extend their findings beyond
the studied population.
The researchers ran multiple tests to check the sub-samples for their independence
assumption. (Lavie and Rosenkopf, 2006) As for the assumptions regarding the theoretical
domain, the researchers state that there are found similar results in other studies. As Hak
(2013) states in the Course Book: Homogeneity of the domain is the exception and should
only be assumed after a series of studies in rather different populations have all shown more
or less similar results. As the above stated is not the case in this research, there can be
Exploration Activities & Firm Performance
65
assumed that the theoretical domain is heterogeneous. They state that they found similar
results and adding that because of the fact that they were using multiple indicators for their
hypotheses, it is likely that there were more aspects that were not prior measured that has
an effect on the measured variables. E.g. more R&D alliances as used in this research. (Lavie
and Rosenkopf, 2006) The practical relevance of the observed effect are somewhat limited
to our own research as the report uses multiple measures on different hypotheses than our
own. We therefore tend to use a limited number of the reported effect-sized for our own
meta-analysis as they do give us more information about the relation between firm
performance and exploration activities. (Lavie and Rosenkopf, 2006)









Exploration Activities & Firm Performance
66
Appendix B7. Alternative Knowledge Strategies, Competitive Environment,
and Organizational Performance in Small Manufacturing Firms
This article, which is written by Paul E. Bierly and Paula S. Daly, examines the relationship
between knowledge strategy (exploration or exploitation) and performance, and the
possible role of external environment variables.(Bierly and Daly, 2007). The research
strategy is cross-sectional by using surveys that were sent to 250 small to medium-sized
manufacturing firms in the mid-Atlantic region of the United States, of which eventually 98
would participate in the research and met the criteria. The writers define the concept of
exploration according to an earlier definition by March which states that: exploration
strives to develop capabilities to excel at the creation or acquisition of new knowledge and
where exploitation develop capabilities to excel at the ability to leverage existing knowledge
to rapidly create new organizational products and processes. (Bierly and Daly, 2007) March
(1991) also argued that the exploration of radical new knowledge is more likely maximize
long-term firm success. In this article, the firms success is measured using the firm
performance and is measured with the extent to which the firm has excelled in the areas
of financial performance and growth over the three previous years. (Bierly and Daly, 2007).
In the search for an association between the dependent variable performance and the
independent variable exploration, none of the papers hypothesis exactly matches our
hypothesis. Instead of looking at one specific hypothesis from this paper, we only specify on
the relationship between exploration and firm performance, which is also measured in this
article. The unit of analysis of this paper is somewhat different from the focal unit of our
hypothesis. As described above, this paper is about small to medium-sized manufacturing
firms, while our paper is about all firms in the world, in all economic sectors, in all countries.
Even though this research was conducted in the United States, and mainly in the state of
Virginia, the authors of the article do not insinuate that their findings are limited to this area.
The authors of this article also recommend that the research must be expanded to larger
firms as well.
When examining the variables of this paper, there can be concluded that the independent
variable and the dependent variable of this article match with the independent variable and
the dependent variable of the main hypothesis. Both are about the exploration strategy and
the firm performance of a company. When taken a closer look to the research results that
Exploration Activities & Firm Performance
67
are published in the paper (see table below), there can be found an effect size concerning
our own research hypothesis. This effect size is denoted as a correlation coefficient (r) which
carries a value of 0.253 for the association between our variables. Since the correlation is
basically a standardization of the covariance, it concerns a standardized, but unit-free
measurement. This suggests that there is a little likelihood of a positive association between
the two variables. From statistical software that was provided, it was possible to obtain the
confidence intervals (CIs) for this correlation. The lower confidence interval is 0.055 and the
upper confidence interval is 0.432. A very positive and notable fact is that the writers
mention that the impact is less than expected because they only focus on small firms. A very
positive fact is that the writers exclusively use these Pearson correlation coefficients for the
interpretation of their results, but for the other hypotheses it uses some regression models.
Table A7. Copy of Table 2 of the article Alternative Knowledge Strategies, Competitive Environment, and Organizational
Performance in Small Manufacturing Firms (Bierly and Daly, 2007).

As mentioned above, this research presents a cross-sectional study. The paper provides
correlation and regression for the other hypotheses, what makes the effect size parameters
consistent with the research strategy (Hak, 2013). A cross-sectional study consists of data
collection from a population or sample at one moment in time. This can be concluded from
the way the writers describe the following effect supporting hypothesis 3: The exploitation
and the exploitation-squared terms are significant, indicating a concave, nonlinear
relationship between exploitation and performance that supports hypothesis 3. Thus,
exploitation is positively correlated with performance up to a point, but then is negatively
correlated. (Bierly and Daly, 2007). But according to the Research Training and Bachelor
Exploration Activities & Firm Performance
68
Thesis course book, a cross-sectional study has the lowest level of internal validity for
generating evidence regarding a causal effect (Hak, 2013).
The population of this study are small to medium-sized manufacturing firms in the mid-
Atlantic region of the United States. These participants were provided by the state Small
Business Development Centres, which identified potential participants and provided
company names and contacts. (Bierly and Daly, 2007). Because not all the small to medium-
sized manufacturing firms in the mid-Atlantic region of the United States were selected, this
study covers a sample of the population. The population is within our theoretical domain,
since we include all firms in the world, in all economic sectors, in all countries, at all times.
All the companies are from a list which is known by the Business Development Centres. The
writers do not give us the information to find out whether this is a complete list of the
population or not. According to Hak (2013) such list is do not count as probability sample. He
also mentioned that a requirement for the application of inferential statistics in a data set
is that the sample is complete. (Hak, 2013). From the sample of 250 companies, only 98
returned a complete questionnaire. Also, the paper did not mention anything about non-
response. According to Hak (2013), this study can be labelled as a failed study because of
the incorrect sampling method and non-response.
When we look at the data measurement method, the respondents from this research were
three individuals working in different positions within the company, with preference
given to top management, human resources, and production positions. (Bierly and Daly,
2007). They did this to eliminate single-source bias. However, the answers of the employees
could have been somewhat flawed. Furthermore, the validity and reliability of the
measurements should be mentioned. The validity is checked with the aid of the intra-class
correlation coefficient (ICC). The ICC can be used to quantify the degree of agreement
between two (or more) repeatedly measured values. (Geloven and Bossuyt, 2009) and
indicate a moderate to high level of inter-rater agreement. Also a factor analysis of the
eight items in the exploration and exploitation scales was used to establish independence of
these constructs. (Bierly and Daly, 2007). And therefore one item was eliminated. As
mentioned above, the writers used multiple respondents per firm to eliminate single-source
bias. But according to Hak (2013) using informants is always a threat to reliability.
Exploration Activities & Firm Performance
69
When we look at the conclusion and the claims made in the paper from Bierly and Daly, we
can conclude that the study does not make any claims beyond the studied population. When
there is referred to the results, these are only implied with regard to the cases investigated.
Because the researchers did not make use of a series of studies there can be concluded that
the theoretical domain is heterogeneous. Unfortunately, the results of the study are not
compared with those from other studies. A positive aspect is that the researchers found a
significant correlation which suggests that there is an association between the two variables,
especially for small to medium-sized manufacturing firms in the mid-Atlantic region of the
United States. But due to its cross-sectional nature, the research has relatively little
managerial relevance. They state that One limitation of our study is that we measure
performance over a 3-year period, which does not capture the long-term effects of
exploration. (Bierly and Daly, 2007).