Local Search vs. Exploration in Innovation Processes

Innovative Organization

Seminar Paper 2008 23 Pages

Business economics - Business Management, Corporate Governance


Table of content



A. Description
I. The setting / context
II. Innovation
III. The innovative organization
IV. Exploitation /exploration

B. Answering the questions
I. “When?”: Levels of the innovation process
II. “How?”: Exploration, Exploitation and Ambidexterity
III. “Why?”: Endogenous and the exogenous approach

C. Decision making framework
I. Dimension overview
II. The framework




Table 1: Overview of general questions

Table 2: Overview of different elements within different dimensions

Table 3: Overview of terminological problems

Table 4: Overview of label concepts

Table 5: Overview of dimensions to define conceptualize styles

Table 6: Intuitive dimension affiliation for exploration and exploitation

Table 7: Overview of exogenous and endogenous elements that help choosing innovation styles on every level of the innovation process.

Table 8: Horizontal and vertical ambidexterity

Table 9: Desired framework content (summary of chapter B.)

Graphic 1: Combination of approaches, levels and styles


Internationalization, shorter product life cycles and increasing complexity have lead to a situation in today’s world where organizations around the globe, on every level of the innovation process and in every industry, face increasing competition. Especially affected by these characteristics are high-tech industries, which are often characterized through a high rate of product novelties, cutting edge technology and rapidly changing industry standards. Examples for high-technology industries that have been used in academic journal articles and that have been subject to empirical research are the robotic industry1, the semiconductor industry2 and the optical disc industry3. Especially in those industries organizations rely on constant and ongoing innovation to create and sustain competitive advantages4 and, therefore, to stay in business. Those innovative companies that constantly innovate and that are characterized through a high level of entrepreneurship can also be illustrated as “knowledge-creating companies” or “learning organization”5. But what makes them so innovative? How do they choose an innovation style6? How is innovation managed? My point in this paper will be that innovation management should be able to answerer the following three questions:

illustration not visible in this excerpt

Table 1: Overview of general questions

These questions seem to be most important since Fagerberg7 states in the introduction of the Oxford Handbook of Innovation: “In spite of the large amount of research in this area during the past fifty years, we know much less about why and how innovation occurs than what it leads to.” Additionally, the question of “when?” is added to conceptualize the innovation process into dependent innovation process levels that follow each other in a distinct order.

To answerer these questions I will start with a general description of what innovation is, what exploration and exploitation are, I will describe the general setting in which organizations have to operate and what defines an innovative organization.

A. Description

I. The setting

As I8 have pointed out in the introduction a lot of research has been done especially in the high-technology industry. In particular within the high-technology industry the decision for the right innovation styles is a strategic choice and is substantial for survival because within that industry, the success depends on the ability to innovate consistently9.Steele and Murray10 point out that “...organizations, which need to adapt continuously to complex and changing conditions, can only survive and proliferate through innovation.”

The necessity for constant innovation in industries like the high-technology industry can be explained by the concept of hypercompetition. Hypercompetition is defined by D’ Aveni11 as “...an environment characterized by intense and rapid competitive moves, in which competitors must move quickly to build advantage and erode the advantage of their rivals”. But, as Wiggens and Ruefli12 point out this concept “...is seen across a broad range of industries”. Therefore the ability to constantly innovate and to create innovations becomes even more important for all organizations. There are different labels13 in use that describe organizations that survive a turbulent and hypercompetitive environment because of their ability to correspond. Examples for these other labels are “knowledge-creating companies” or “learning organizations”14. However the core idea behind these labels is always the same – being constantly innovative either through innovation, learning or knowledge-creation. But what is innovation?

II. Innovation

Definitions for “Innovation” exist in large quantities. One reason for that is that “innovation” is a social construct15 hence is not a naturally existing object. The terminological definition always refers to the perception of the author. Kline and Rosenberg16 therefore point out “... it is a serious mistake to treat innovation as if it were a well-defined homogeneous thing that could be identified ...” The different dimensions that have been looked at in research always depended on the subject of research and depended on which dimensional concept of innovation was in the centre of research. Therefore it is not possible to define innovation accurately. A proof for that are the intense variations and the extensive diversity of innovation concepts, which point out the complexity and the vagueness of innovation apprehension.

Especially when it comes to the question “how?” innovation is achieved or “why?” innovation occurs many different characteristics along different dimensions have been used to describe the phenomenon of innovation. Already in the year 1967 Becker17 notices that “... at the moment there is only a slender thread of agreement or commonality among the writers on innovation.”

A very recent conceptualization of innovations has been done by Ying Li18 in 2008. Ying Li defines and conceptualizes innovation along three different dimensions.

illustration not visible in this excerpt1020

Table 2: Overview of different elements within different dimensions

These different21 dimensions can be easily used to categorize the object of research and to select studies and research results for comparison.

But a very early and basic approach to economic development and innovation has been made by Schumpeter22 the “pioneer”23 of innovation research, who conceptualizes innovation within the following two dimensions: First, he defines the innovation process as a three level concept which is made of the three different levels invention, innovation and diffusion. Within that dimension, the invention is conceptualized as a basic idea while the innovation is the carrying out of that idea. Diffusion is the further dissemination24. The understanding of Schumpeter’s innovation process definition is very close and comparable to Ying Li’s25 value chain conception.

Secondly, Schumpeter defines and names five different types of innovation. These types are: Product innovations, process innovations, organizational innovations, usage of new resources and the tapping of new markets. The distinction between product innovation and process innovation gets the most attention. Schmoolker26 calls it the distinction between “product technology” and “production technology”.

In a lot of research the impact of innovations has also been attempted to measure. Most commonly used is the unilateral dimension from incremental to radical. Incremental innovations can be characterized as continuous improvements of a referring type, as opposed to radical innovations which are the introduction of a very new type.27

Further on my emphasis will be on the innovation process how Schumpeter calls it or respectively the level of the value chain which could lead to all different types of innovation and includes incremental and radical innovations. Although especially radical innovations are believed to be the source of competitive advantages. To systemize my findings I will try to explain what the coherence of innovative organizations across industries is and what distinguishes them from organizations that are not innovative.


1 cf. Katila/Ahuja 2002

2 cf. Stuart/Podolny 1996

3 cf. Rosenkopf/Nerkar 2001

4 see Barney 1991

5 Rosenkopf/ Nerkar 2001, p. 287

6 I use style instead of method or technique to underline the ambiguity

7 Fagerberg 2006, p. 20

8 I use description instead of definition to emphasis on the social construction of the concepts

9 cf. Rosenkopf/Nerkar 2001, p. 287

10 Steele/Murray 2004, p. 316

11 D’Aveni 1994, pp. 217–218

12 Wiggens/Ruefli 2005, p. 887

13 I use label instead of terminology to underline the vagueness and ambiguity

14 Rosenkopf/ Nerkar 2001, p. 287

15 see Boghossain 2001, pp. 6-8

16 Kline/Rosenberg 1986, p. 283

17 Becker/ Whisler 1967, p. 467

18 cf. Ying Li et al. 2008

19 cf. Ying Li et al. 2008, p. 111

20 cf. Ying Li et al. 2008, p. 112

21 cf. Ying Li et al. 2008, p. 112

22 cf. Schumpeter 1949
23Blättel-Mink 2006, p. 31

24 cf. Fagerberg et al. 2005, p. 4

25 cf. Ying Li et al. 2008, p. 112

26 Schmoolker 1966, p. 166

27 cf. Fagerberg et al. 2005, p. 7


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Free University of Berlin – Fachbereich Wirtschaftswissenschaften
Local Search Exploration Innovation Processes Innovative Organization



Title: Local Search vs. Exploration in Innovation Processes