Organizational ambidexterity, market orientation, and firm performance

Although ambidexterity is crucial for a firm's long-term success, existing literature offers conflicting views regarding the relationship between exploitation and exploration and thus how to allocate resources to leverage ambidexterity for firm performance. This research aims to investigate if the effects of ambidexterity on firm performance are different in firms with proactive or responsive market orientations. Based on the attention-based view and ambidexterity and market orientation literatures, we proposed six hypotheses and examined them with data from 203 Chinese firms. We find that, in a firm with responsive market orientation, exploitation has a positive effect whereas exploration has an inverted U-shaped effect on firm performance. In contrast, in a firm with proactive market orientation, we find that exploitation has an insignificant effect whereas exploration has a positive effect on firm performance. We find that the interaction of exploitation and exploration has a negative effect on firm performance in a firm with responsive market orientation whereas it has a positive effect in a firm with proactive market orientation. By investigating the contingent role of strategic orientation, this research contributes to the debate on whether exploration and exploitation are incompatible or complementary and also enriches contextual ambidexterity literature.