Learning and innovation: Exploitation and exploration trade-offs

This paper examines the relationship between learning and innovation outcomes, focusing on the trade-off between exploitation and exploration in learning and innovation. The study identifies two types of learning and two outcomes of innovation. Exploitation and exploration in learning are inversely associated with innovation rates and impact. While exploitative, localized learning is positively associated with innovation rates, but negatively associated with impact, exploratory learning-by-experimentation shows the opposite relationship. The study examines panel data of 103 companies in the global pharmaceutical industry over a 7-year period in an empirical test of our hypotheses. Results support the existence of the exploitation and exploration trade-off.

► This study identifies two types of learning and two outcomes of innovation. ► Exploitation and exploration in learning are inversely associated with innovation rates and impact. ► Results support the existence of the exploitation and exploration trade-off.