Competition and ambidexterity : evidence of dynamic adjustment (with Raffaele Morandi Stagni, Universidad Carlos III de Madrid & Juan Santaló Mediavilla, Instituto de Empresa Business School)
Corporations dynamically adjust their technology search strategies (i.e., exploitation vs. exploration) to respond to changes in their competitive environment. We posit that companies react to increased competitive threats by temporarily shifting toward exploitation, because the immediate risk of business failure becomes salient. Over time, they then rebalance by directing more effort toward exploration. We test these theoretical arguments with a panel of U.S. manufacturing firms, using both instrumented regressions and a difference-in-difference design to capture the causal link between competition and firms’ technology search strategies. The results show that competition leads firms to focus on exploitation, at the expense of exploration; the difference-in-difference design further indicates that this process reverts four years after the competitive shock.