Exploration, exploitation, and financial performance: Analysis of S&P 500 corporations

Juha Uotila, Markku Maula, Thomas Keil, Shaker A. Zahra

Research output: Contribution to journalArticlepeer-review

652 Scopus citations


The literature suggests that established firms need to balance their exploration and exploitation activities in order to achieve superior performance. Yet, previous empirical research has modeled this balance as the interaction of orthogonal activities. In this study, we show that there is a trade-off between exploration and exploitation and that the optimal balance between exploration and exploitation depends upon environmental conditions. Using a novel methodology to measure the relative exploration versus exploitation orientation, we find an inverted U-shaped relationship between the relative share of explorative orientation and financial performance. This relationship is positively moderated by the R&D intensity of the industry in which the firm operates.

Original languageEnglish (US)
Pages (from-to)221-231
Number of pages11
JournalStrategic Management Journal
Issue number2
StatePublished - Feb 2009


  • Behavioral theory of the firm
  • Exploitation
  • Exploration
  • Organizational learning
  • Performance


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