Can strategic exploration guide firms through Environmental Punctuation? A study in the setting of early Internet commercialization

As the commercial use of the Internet punctuated the business environment, firms are facing new challenges and opportunities, such as discontinuity, changed business norms, and additional freedom to maneuver. In the lens of Punctuated Equilibrium Theory, this scenario constitutes a punctuation phase of the industrial environment, or "Environmental Punctuation," which witnesses the overturn of basic competitive rules. It is important, both theoretically and practically, to study how firms respond strategically. More specifically, this study examined how firms reorient strategic emphasis to the exploration of new possibilities, since firms obsessed with existing knowledge may fall into a "competency trap.";Two research questions were investigated: (1) Do firms in industries experiencing Environmental Punctuation respond with more Strategic Exploration? (2) What is the performance implication of Strategic Exploration under the influence of Environmental Punctuation? As I proposed, the level of Strategic Exploration varies in three dimensions: Frequency (the frequency that firms launch new strategic actions), Novelty (the extent that the new strategic actions deviate from common business practice in the industry), and Breadth (the degree to which firms launch diverse strategic actions).;The research questions were addressed empirically using 52 randomly sampled firms from industries experiencing Environmental Punctuation, and 43 from industries not experiencing Environmental Punctuation, during the period of 1998--2001. The results from MANOVA and Multiple Regression suggested that (1) Frequency, Novelty, and Breadth are indeed central dimensions of Strategic Exploration; (2) firms that must cope with Environmental Punctuation, initiate strategic actions more frequently, and their strategic actions are more novel; (3) Environmental Punctuation negatively moderates the Strategic Exploration-performance relationship. For industries experiencing Environmental Punctuation, the Strategic Exploration-performance relationship becomes less positive, or even negative due to the moderation effect; (4) Environmental Punctuation itself has statistically significant positive effects on performance.;Consequently, the answer to the first research question is "Yes"---firms maneuver with more Strategic Exploration in industries experiencing Environmental Punctuation. For the second research question, the answer is more dynamic. When Environmental Punctuation is present, Strategic Exploration has a downward effect on performance. Luckily, with the beneficial effect of Environmental Punctuation on performance, firms gain extra buffers to afford the costly Strategic Exploration.