The Intra-firm Concentration of Exploratory Learning Activities and the Multinational Corporation’s Innovative Performance

Abstract

This study focuses on the impacts of the distribution of exploratory learning activities across subunits within an organization on the returns of exploration. Drawing upon the extant organizational learning literature and the knowledge-based view of the firm, we propose that the preferred structure of exploration within a firm balances the tension between concentration and dispersion of exploratory activities and entails superior knowledge search and transfer efficiency. We analyse the US patent data matched with firm-level data of the world’s largest multinational corporations in the electronics and pharmaceutical industries. We find that a concentrated distribution of exploration is positively associated with firm innovative performance. Exploration scale negatively moderates the positive relationship between concentrated exploration and firm performance. This study contributes to the organizational learning, international business and technological knowledge management literature by identifying the intra-firm distribution of exploration as an important yet neglected dimension of organizational learning and determinant of firm performance.