Purpose – This paper aims at evaluating the effects of the exploitation and exploration strategies on the economic and innovative performance of a local system of firms. Accordingly, this study embraces the exploration-exploitation dilemma (e.g., March, 1991; Benner and Tushman, 2003; Burgelman, 2002; Holmqvist, 2004; Katila and Ahuja, 2002) and differently from the extant literature we investigate the two above mentioned innovation strategies at the level of a system of firms rather than at a single organization’s one. Specifically, we aim at empirically analyzing which strategy is more beneficial for those systems of organizations? Can systems benefit more by the introduction of new technology into existing products and processes or they can take more advantage by the continuous improvement of their technological knowledge base?
Design/methodology/approach – To reach our aim, an empirical research has been conducted on the 103 Italian Provinces, by measuring for each province both economic and innovative performance and indexes that capture the exploitation and exploration strategies. Specifically, focusing on the manufacturing sector, we use two different indexes, as: the inverse Gini coefficient of the distribution of firms by sector (two-digit level) in each province, which measures the heterogeneity across unrelated manufacturing sectors, and the inverse Gini coefficient of the distribution of firms within each two-digit sector in each province, which measures the heterogeneity across related manufacturing sectors. Furthermore, a set of control variables is included to account for other potential effects on provinces’ performance.
Originality/value – Our results reveal that exploration strategies, as reflected by the agglomeration of industrially different organizations, have positive effects on the economic and innovative performance in a territory, as well as that this effect results greater when the exploration regards more similar industrial sectors. Our interest on the effects of the two strategies on a system of firms rather than on a single organization significantly offers contributions both to the literature related to innovation strategies and to the studies on local economic growth. Specifically, while most of previous studies on innovation strategies adopt as level of investigation the single organization or dyadic collaborations, we focus on the exploitation-exploration balancing at the level of firms’ geographical systems. Furthermore, analyzing which of the two strategies is more conducive for the territorial development and growth, allows us to give a contribution in the field of economic growth and regional development, answering the question on the relevance of heterogeneity in firms’ competencies and capabilities for the competitive advantage of the local systems of firms (Boschma, 2005; Schamp et al., 2004).
Practical implications – Of course this study presents a number of practical implications, especially referring to the definition of innovation strategies and policies aimed at sustaining the economic and innovative outcomes of given territories. In particular, our findings suggest the importance of enhancing local development by favouring the establishment of organizations operating in different by complementary industrial sectors