Where The Streets Have No Name: Exploration and exploitation in novel digital settings

Organizations are caught in a struggle to capitalize on existing strengths and competencies whilst pursuing new opportunities. To succeed, they must strike a balance between exploration and exploitation (March, 1991). A significant amount of research looks at how ambidextrous organizations do both simultaneously; but fails to address key questions about exploration and exploitation (i) in novel settings, (ii) at a micro level, (iii) over time. In particular, few studies take the impact on environment novelty into account or look at the role of Information and Communication Technologies (ICTs). This study therefore investigates the dynamics of organizational exploration and exploitation in the virtual world of Second life. The study reveals that transitions between exploration and exploitation are triggered by changes in perceived environmental complexity over time. The paper presents a new conceptual framework which identifies some of the main factors affecting the dynamics of this process and shows how their significance changes over time.