Exploratory and Exploitative Innovation and Firm Performance: An Empirical Analysis Considering the Moderating Effect of Slack Resources

Abstract

This empirical analysis investigates the relationship between exploratory and exploitative innovation strategies and firm performance, considering the moderating effect of slack resources. Drawing on the dynamic capabilities perspective and resource-based view, this study examines how firms balance exploration and exploitation activities to enhance performance outcomes. Utilizing a sample of firms from diverse industries, empirical evidence is gathered through surveys and archival data analysis. The findings indicate that both exploratory and exploitative innovation positively influence firm performance, albeit through different mechanisms. Furthermore, slack resources are found to moderate this relationship, with higher levels of slack resources strengthening the positive impact of exploratory innovation on firm performance, while attenuating the relationship between exploitative innovation and performance. These results provide nuanced insights into the strategic management of innovation and resource allocation decisions within organizations.