Innovation through Ambidexterity: How to Achieve the Ambidextrous Organization

It has long been recognized in the literature that the pursuit of radical or disruptive innovation by established firms poses an organizational challenge for the firm. This is because the skills, structures, processes and mindsets required for exploiting the existing business are fundamentally different and often conflict with those required for radical innovation (i.e. exploration). This has led researchers to propose the need for “ambidextrous” organizations—companies capable of achieving efficiency in their existing business while at the same time having the strategic foresight to innovate and explore new businesses. Past research has found some support for a positive relationship between performance and the ability to be ambidextrous. There is, however, little evidence on how a firm can actually achieve ambidexterity. In this paper, we explore the issue of ambidexterity in the context of diversified firms. Specifically, we examine diversified firms that need to manage divisions that face conflicting demands for integration and responsiveness. Not all divisions of a diversified firm face such conflicting demands, so we focus on only those divisions that do. These divisions must be given autonomy to be locally responsive but must also be centrally controlled to allow for the efficient exploitation of interdependencies with the parent (and other divisions in the diversified firm). We use theory to propose ways by which a diversified firm could achieve such ambidexterity in its handling of these divisions. We then utilize questionnaire data from the 100 biggest business Groups in Taiwan to empirically test our hypotheses. We find that granting operational autonomy to separate divisions while centralizing strategic and financial controls promotes the achievement of ambidexterity. We also find that ambidexterity could be promoted through the use of strong values, rotation of managers and internal training programs.