Integration mechanisms for different types of innovation: case study in innovative companies.
| Autor | Lizarelli, Fabiane Leticia |
1 Introduction
Innovation is associated with increased performance, the creation of new markets, differentiation, and competitive advantage (Blindenbach-Driessen & Ende, 2014; Bogers & Lhuillery, 2011; Prange & Schlegelmilch, 2016). In addition, firms innovate to defend their existing competitive positions as well as to seek sustainable competitive advantages (Garcia & Calantone, 2002).
Companies may adopt multiple innovation types across their corporate lifecycles, but mixing multiple types of innovation has often been considered complex, while focusing on a single type of innovation can result in decreased performance (Prange & Schlegelmilch, 2016). In addition, different innovation types require different competencies, resources, knowledge, and investments, and imply different risk potentials (Smith & Tushman, 2005).
It is possible to classify and differentiate innovation using dimensions such as the object of innovation and the degree of innovation. The object of innovation encompasses product innovation and process innovation (the focus of this research), marketing innovation, and organizational innovation (Organization for Economic Co-operation and Development [OECD], 2005). The degree of innovation is related to the novelty involved and this innovation has been classified as disruptive, radical, architectural, and incremental (Garcia & Calantone, 2002).
Innovation may originate from two forces, marketing and technological, and some products may require discontinuities in both (Garcia & Calantone, 2002). Considering technology, innovation can be, for example, incremental, architectural, or discontinuous (Christensen, 1997; Henderson & Clark, 1990). Considering the market, innovation may focus on existing customers, new customers in defined markets, or emerging markets (Christensen, 1997; Tushman & Smith, 2005).
Incremental technology changes to a firm's current product, targeting existing customers, is called exploitative innovation resulting in an exploitative product. Architectural or discontinuous changes in technology, targeting new customers in a defined market or emerging market, is explorative innovation (Tushman & Smith, 2005).
Prange and Schlegelmilch (2016) developed propositions to explain the interaction between different types of innovation, considering the exploitation-exploration paradigm, which reflects the belief that companies simultaneously or sequentially adopt several types of innovation.
In the literature, exploitation refers to the refinement and extension of current knowledge in ways that are conducive to incremental innovation, while exploration refers to experimentation and the development of new knowledge leading to radical innovation and long-term success (Andriopoulos & Lewis, 2010; Atuahene-Gima, 2005; Benner & Tushman, 2002; March, 1991; Smith & Tushman, 2005).
Exploitation can be defined as the incremental refinement of a firm's existing products aimed at improving existing product-market domains, and exploration can be seen as the development of new products aimed at new product-market domains (Piao & Zajac, 2016). Exploration leads to completely new innovations and exploitation preserves existing innovations (Prange & Schlegelmilch, 2016).
Early research observed the exploration-exploitation paradigm and viewed the innovation types as being exclusive; however a few studies have started to consider the simultaneousness of exploitative and explorative innovation (He & Wong, 2004; Prange & Schlegelmilch, 2016; Rothaermel & Deeds, 2004). Successful exploration creates demand to exploit newly discovered opportunities. Valuable knowledge and skills are acquired through exploration, and the firm then turns to exploitation activities (Rothaermel & Deeds, 2004). Piao and Zajac (2016) identified two types of exploitation: repetitive exploitation (the repetition of existing designs for existing products) and incremental exploitation (the creation of new designs for existing products) and they recognized that these two types of exploitation have different effects on exploration.
We proposed to use the exploration-exploitation concept for product and process innovations. Exploitative innovation is defined, in this research, as the set of activities to incrementally refine a firm's existing processes or existing products that focus on existing product-market domains, while explorative innovation is the development of new processes or products aimed at entering new product-market domains.
Considering that adopting multiple types of innovation is beneficial to the organization's performance (Prange & Schlegelmilch, 2016) and observing that there may be simultaneity between exploitation and exploration innovation (He & Wong, 2004; Rothaermel & Deeds, 2004), one question to be answered is whether simultaneity can enable interaction and collaboration between exploration and exploitation innovation activities, which can be identified by the presence of integration mechanisms (Jansen, Tempelaar, Bosch, & Volberda, 2009). Recent developments in the literature have suggested an approach which focuses on the integration of exploration and exploitation activities (Colombo, Doganova, Piva, D'Adda, & Mustar, 2014) and despite the benefits that may result, the research on explicit integration mechanisms is still scarce (Gassmann, Widenmayer, & Zeschky, 2012).
Integration is explained primarily in organizational learning and innovation management literature (Martini, Laugen, Gastaldi, & Corso, 2013), and emphasizes the interdependence of opposing constructs by enabling the coordination and sharing of divergent knowledge (Chang & Hughes, 2012), through social, cognitive, and organizational integration mechanisms (Jansen et al., 2009; Martini et al., 2013). While integration is necessary to successfully obtain a balance between innovative activities (Gassmann et al., 2012; Jansen et al., 2009), there are few studies on integration mechanisms related to exploration and exploitation (Gassmann et al., 2012; Jansen et al., 2009; Wang & Rafiq, 2014).
Integration considers the exploitation and exploration tensions to be intertwined and synergistically connected (Andriopoulos & Lewis; 2009), and it supports improved coordination of knowledge sharing and connection between individuals (Chang & Hughes, 2012). Organizational integration mechanisms are associated with knowledge combination in two dual structures: formal cross-functional interfaces, and informal social relations or connectedness (Jansen et al., 2009). While previous research has emphasized the tensions engendered by the combination of exploration and exploitation, the integration of these two types of activities also can generate synergies (Colombo et al., 2014).
Considering that companies adopt multiple types of innovation, the purpose of this research is to identify if companies use integration mechanisms between exploitative and explorative innovation to foster interaction between these activities, as well as to identify the benefits for the product development process. The research observed the use of integration mechanisms between: (i) exploitative product innovation and explorative product innovation, and (ii) exploitative process innovation and explorative product innovation. We adopted the multiple case study method in four companies from different sectors which are a reference in product and process innovation.
The research contributes to the literature related to exploration-exploitation innovation concepts by showing that in addition to the need for the co-existence and balancing of exploitative and explorative innovation these activities can be integrated and may foster better results for product innovation (Chen & Kannan-Narasimhan, 2014; Colombo et al., 2014; Gassmann et al., 2012; Raisch, Birkinshaw, Probst, & Tushman, 2009). The studies on integration are scarce and there are no studies that deepen the analysis of mechanisms for the integration of exploitative and explorative innovation activities. Another contribution is that the study addresses integration by separating product and process activities, enabling a better understanding of how integration mechanisms can occur, and the benefits generated.
In relation to managerial implications, by identifying integration mechanisms at team and individual levels and their impact on product innovation, companies can organize themselves in a way that structures and facilitates the occurrence of the most impacting mechanisms and rethink the exploitation-exploration paradigm using a collaborative vision.
The paper has four additional sections: the literature review; the method, which presents the research stages; the field research and data analysis results; and the conclusions.
2 Literature Review
2.1 Exploitation and exploration
The concept of exploration and exploitation is related to ambidextrous companies. The first time the term ambidextrous was used was in a paper by Duncan (1976). In the author's ambidextrous model there are two stages related to innovation adoption: initiation and implementation. The first one is more related to organic characteristics--high structural complexity and less formalization and centralization--while mechanistic characteristics facilitate implementation--low structural complexity and a high level of formalization and centralization. March (1991) extends Duncan's (1976) studies (Martins, Rosseto, Lima, & Pereira, 2014) and is the main influencer of the research on organizational ambidexterity and the most mentioned in research on the subject from 1993 to 2010 (Silveira-Martins & Rossetto, 2014).
To expand the studies of Duncan (1976), March (1991) proposes the terms exploitation and exploration, which were defined by Duncan (1976) as implementation and initiation, respectively (Martins et al., 2014). Exploration is related to research, risk taking, experimentation, and innovation, while exploitation is related to refinement, efficiency...
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