Full paper is at http://bit.ly/1hzbx5k 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 qustions 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.

1. Where the streets have no name:
EXPLORATION AND EXPLOITATION IN NOVEL DIGITAL SETTINGS
Niamh O Riordan, National University of Ireland Galway, Ireland
Frédéric Adam, University College Cork, Ireland
Philip O’Reilly, University College Cork, Ireland
niamh.oriordan@nuigalway.ie
www.niamhoriordan.com
ie.linkedin.com/in/niamhoriordan/
European Conference on Information Systems, TEL AVIV 2014
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2. AGENDA
1. Background
2. Some overlooked questions
3. Research approach
4. Findings
5. Summary
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3. 1. BACKGROUND
• Organisations are goal-directed social entities that are designed as deliberately
structured and coordinated activity systems (Daft, 2009, p. 10). Organisational
design is therefore a question of pooling resources and coordinating activities
– Exploitation is
• the use and development of things already known
• the refinement and extension of existing competencies, technologies and
paradigms
• captured by terms like refinement, choice, production, efficiency, selection,
implementation, and execution
– Exploration is
• the pursuit of new knowledge, of things that might come to be known
• experimentation with new alternatives
• captured by terms like search, variation, risk taking, experimentation, play,
flexibility, discovery, innovation
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Factoid:
The number of leading management journal
publications on this topic increased eight fold
between 2004 and 2009 (Raisch, et al., 2009)

4. 5
• Firms typically overemphasise exploitation (more immediate and certain returns;
reduced the risk that effort will result in dead ends)
• But as a result, they are likely to “suffer the costs of experimentation without
gaining many of the benefits and to exhibit too many undeveloped new ideas and
too little distinctive competence” (March, 1991)
• Whilst firms that engage in exploitation to the exclusion of exploration are “likely
to find themselves trapped in suboptimal stable equilibria” (March, 1991)
1. BACKGROUND
European Conference on Information Systems TEL AVIV 2014

5. 6
The challenge:
to trade off the pursuit of efficiency and
effectiveness today (based on existing strengths
and competencies) against the need for change
and renewal tomorrow (based on the pursuit of
new opportunities)
How?
Ambidexterity?
Punctuated equilibrium?
1. BACKGROUND
Exploitation
~incremental innovation
vs
Exploration
~ radical innovation
European Conference on Information Systems TEL AVIV 2014

6. 2. SOME OVERLOOKED QUESTIONS
• What of organisations operating in novel settings? [novelty]
– Afterall, firms are, by definition, linked to the external environment (cf. Daft, 2009, p.
10) so organisational design must also be seen as a question of adapting to changes in
the external environment
• Must all firms achieve this balance?
• If yes, then we must increase our understanding of ambidexterity and punctuated
equilibrium approaches [process]
• If no, then we must ask about alternate strategie. For instance, might firms successfully
pursue a deliberate strategy of specialisation? [ICTs]
• Are these two concepts continuous (complementary) or orthogonal (mutually
exclusive)? [micro]
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7. 3. RESEARCH APPROACH
• We carried out 6 case studies in Second Life
over a 12 month period
– Novely
– Digitally mediated environments
– Significant opportunities for data collection
8European Conference on Information Systems TEL AVIV 2014

8. 4. FINDINGS
• Study participants in the six cases engaged in 15 distinct types of activity that
could be classified as
– exploratory and endogenous
– exploratory and exogenous
– exploitative and endogenous
– exploitative and endogenous
• At the individual and group level, transitions from exploration to exploitation are
triggered by changes in perceived environmental complexity over time (which are
a function of prior knowledge)
– We used Snowden’s Cynefin framework to distinguish between
• the chaotic (where practices are novel)
• the complex (where practices are emergent)
• the complicated (where good practice begins to emerge)
• the simple (where best practice begins to emerge)
• This process can be accelerated if individuals and teams can successfully utilise
ICTs to work ‘outside’ traditional organisational boundaries and thereby leverage
interorganizational networks
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9. 10

10. 5. SUMMARY
• This paper identifies and sheds light on a number of key gaps in the existing literature on
balancing exploratory and exploitative activities in firms.
• It also investigates the impact of perceived environmental uncertainty on exploratory and
exploitative activities at a micro level in the specific context of virtual worlds
• It reveals that in practice, transitions between exploration and exploitation take place over
time and are primarily triggered by changes in perceived environmental complexity over
time
• For immersed at least, ICTs do have the capacity to either facilitate or prevent particular
types of transition but in virtual worlds (and somewhat counterintuitively) individuals
continue to struggle to engage effectively with others outside the boundaries of the firm
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11. 12
Full paper available at http://aisel.aisnet.org/ecis2014/proceedings/track01/11/ or from
Niamh O Riordan, National University of Ireland Galway, Ireland
Frédéric Adam, University College Cork, Ireland
Philip O’Reilly, University College Cork, Ireland
niamh.oriordan@nuigalway.ie
www.niamhoriordan.com
ie.linkedin.com/in/niamhoriordan/
Thank You
European Conference on Information Systems TEL AVIV 2014