City Research Online

Abstract

Until recently, scholars have customarily lumped multiple dimensions of environmental change into single constructs, and usually ascertained that the more the context changes, the more value firms derive from higher levels of exploration. In sync with more recent studies focusing on specific dimensions of change, in this paper we borrow theoretical elements from systems theory to examine the possibility that the reward to developing innovative product components may itself be eroded by implicit and yet burgeoning costs to fit the new component technology into existing architectures, thereby dampening system performance. Specifically, we theoretically assess how varying magnitudes of industry regulatory changes affect the optimum level of firm exploration, and propose—counter-intuitively vis-à-vis past literature—that the more radical (i.e., competence-destroying), as opposed to incremental (i.e., competence-enhancing) these changes are, the more the optimum intensity of firm exploration recedes. Based on quantitative as well as qualitative empirical analyses from the Formula One racing industry, we precisely trace the observed performance outcomes back to the underlying logic of our theory, stressing that impaired capabilities to integrate the new component in the architecture re-design, as well as time-based cognitive limitations both operate to inhibit the otherwise positive relationship between firm exploration and performance. In the end, we offer new insights to theory and practice.

Publication Type:	Article
Publisher Keywords:	exploration, environmental change, performance, technology, complexity, Formula One
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Departments:	Bayes Business School > Management
SWORD Depositor:	Symplectic Administrator

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