Innovation ambidexterity, resource configuration and firm growth: is smallness a liability or an asset?

Abstract

Plain English Summary When does smallness help or hinder firms to implement innovation ambidexterity? We collected longitudinal innovation data from SMEs in the Korean electronic parts industry to examine how firm size, customer concentration and innovation ambidexterity affect firm growth individually and jointly. There are two important implications. First, for research, this study indicates that smallness is a liability for combined innovation ambidexterity (CIA), but it is an asset for balanced innovation ambidexterity (BIA). Our configurational approach further suggests that research should include a careful fit assessment of firm size, customer concentration and the organisational and technological requirements involved in BIA and CIA to be able to determine the liability and asset of smallness in innovation ambidexterity. Second, for practice, smaller firms are advised to pursue BIA to achieve sustainable growth, but larger SMEs are recommended to adopt CIA. Further to this, smaller firms with high customer concentration can achieve the best growth when pursuing BIA, whereas the same configuration of internal and external resources can lead to the worst growth if they adopt CIA. However, larger SMEs with high customer concentration can effectively pursue CIA and achieve the best growth. This study examines when small- and medium-sized enterprises (SMEs) benefit from innovation ambidexterity for their growth. We argue that innovation ambidexterity in SMEs is sensitive to resource configuration, necessitating a careful fit assessment among firms' internal resources (firm size), external resources (customer concentration) and the forms of innovation ambidexterity. Patent and utility model data from 912 firm-years for the 2000-2017 period in the Korean electronic parts industry were analysed using a feasible generalised least squares (FGLS) model. Consistent with our prediction, we establish that firm size is negatively related to the growth effect of balanced innovation ambidexterity (BIA), but positively to that of combined innovation ambidexterity (CIA), and that customer concentration is positively related to the growth effect of CIA. The three-way interaction patterns further demonstrate that smaller firms with high customer concentration achieve the best growth when pursuing BIA, whereas the same configuration can lead to the worst growth if they adopt CIA.