Exploratory innovation, exploitative innovation, and performance: Influence of business strategies and environment

The purpose of this paper is to explore the impact of a firm's innovation activities on performance, and focus on the internal fit and external fit of two types of innovation activities – exploratory innovation and exploitative innovation.

The paper adopts the survey data of 397 enterprises in eastern, middle, and western China. The business strategy attributes analysis based on strategic orientation of business enterprises (STROBE) scale was used to classify the business strategy types, and hierarchical regression analyses were employed to test the hypotheses.

The results show: both exploratory innovation and exploitative innovation have a positive effect on firm performance; the internal fit between exploratory innovation and exploitative innovation, whether it is fit as moderating or fit as matching, has no significant effect on firm performance; the fit between innovation activity and firm business strategy has significant effect on firm performance, therefore, exploratory innovation activity fits defenders and exploitative innovation activity fits prospectors; and the fit between the innovation activity and external environment has a slight effect on firm performance. Environmental competitiveness can enhance exploratory innovation outcome but diminish exploitative innovation outcome.

The paper has supplied the empirical evidence discovered in the context of China to the theoretical views of exploratory innovation and exploitative innovation, and achieved some results which differ from the ones drawn by similar researches done abroad.