A system dynamics model of exploration and exploitation in Chinese new ventures: The roles of social network and corporate entrepreneurship

Decisions regarding exploration and exploitation are strategically important to Chinese new ventures. Most previous studies have tended to study these two processes in isolation rather than jointly despite the obvious symbiosis between them, not to mention that even less attention has been paid to identify how contextual factors influence how these two processes are managed and controlled.; This thesis develops a system dynamics model of exploration and exploitation. The main propositions are that exploration is dynamically linked with exploitation and social network and corporate entrepreneurship systematically influence the dynamic relationship. Two studies, one qualitative and one quantitative, were conducted in the empirical setting of Chinese new ventures. Generally, supporting evidence was found for the main hypotheses.; Study 1 involved system dynamics modeling based on case studies. The findings were as follows: first, performance gap is positively related to exploration and negatively related to exploitation during the early, middle, and late stages of organizational development; exploration is positively related to total knowledge stock and total knowledge stock in turn is positively related to exploitation in the early stage; and exploitation is negatively related to firm-specific uncertainty and firm-specific uncertainty in turn is positively related to performance gap in both the early half of the middle and the late stages. Second, strong ties facilitate exploitation and weak ties facilitate exploration during the early, middle, and late stages; also, firm-specific uncertainty is positively related to weak ties and negatively related to strong ties in the early stage and in the early half of both the middle and the late stages. Third, radical CE directs exploration and incremental CE directs exploitation in the early stage; and total knowledge stock facilitates both incremental and radical CE during the early, middle, and late stages.; Study 2 involved structural equation modeling based on a large sample of new ventures. The findings were as follows: first, most of the recursive positive relationships in Study 1 were supported in the total sample. Second, for three sub-samples of new ventures during different development stages, only the recursive positive relationships between radical CE and exploration and between incremental CE and exploitation were supported among all the three sub-samples, which was not consistent with the findings in Study 1. Third, the change patterns of the significant relationships in different samples were generally consistent with those findings in Study 1.; In conclusion, the evidence noticeably refutes the static or fragmented perspectives on exploration and exploitation, strong and weak ties, and incremental and radical CE and demonstrates that a system dynamics model linking them is warranted.