Management control systems across different modes of innovation: Implications for firm performance

•This study examines the levers of control (LOC) across different innovation modes.•Innovation is considered in terms of exploitation and exploration.•LOC independently enhance performance of firms specializing in one innovation mode.•Diagnostic and interactive LOC have complementary effects in ambidexterity firms.•Managing contradictory innovation modes requires both combined and balanced LOC.

This study examines the use of management control systems (MCS) across different modes of innovation and the effects on firm performance. Specifically, this study draws on Simons’ levers of control framework to investigate how top managers attempt to simultaneously balance exploration and exploitation, which place contradictory requirements on firms. Using data collected from a survey of top managers in 400 firms this study demonstrates that the patterns of use and interdependencies among control levers associated with enhanced performance differ depending on the mode of innovation. The findings show that control levers are independently associated with enhanced performance in firms that specialize in either exploration or exploitation, suggesting that levers operate as supplementary rather than as complementary controls in these contexts. However, in ambidextrous firms, diagnostic and interactive levers are shown to have interdependent effects on performance. Furthermore, some evidence suggests that both the combined and balanced use of these levers contributes to generating dynamic tension necessary for managing contradictory innovation modes.