UNIVERSITY OF EASTERN FINLAND Faculty of Social Sciences and Business Studies Business School
AMBIDEXTERITY AND TENSIONS MANAGEMENT IN GROWTH ORIENTED SMALL AND MEDIUM-SIZED ENTERPRISES
Master’s Thesis, Innovation Management Marko Parviainen (202447)
November 23, 2020
ABSTRACT
UNIVERSITY OF EASTERN FINLAND Faculty
Faculty of Social Sciences and Business Studies
Unit
Business School Author
Marko Parviainen
Supervisor
D.Sc. (Econ.) Tero Montonen Name of the Thesis
AMBIDEXTERITY AND TENSIONS MANAGEMENT IN GROWTH ORIENTED SMALL AND MEDIUM-SIZED ENTERPRISES
Major Innovation Management
Description Master’s Thesis
Date 23/11/2020
Pages 73 Abstract
Firms have to adapt to change and at the same time benefit from current capabilities in a quickly shifting environment. Ambidextrous firms are exploiting existing capabilities to enable incremental innovation and at the same time explore new opportunities to foster radical innovations.
Achieving a balance between exploitation and exploration enables success based on previous research. However, balancing exploitation and exploration is a challenging task and raises tensions. Previous research suggests that the barrier is even higher for small and medium-sized enterprises (SMEs).
The purpose of this study was to identify how tensions are managed in SMEs using four companies balancing exploitation and exploration as case studies. The investigation involves entrepreneurs as informants.
The findings emphasize the entrepreneur’s role as a frontline manager to foster ambidexterity and the employee’s role as enablers of ambidexterity. It is not enough to have an ambidextrous entrepreneur; organizational ambidexterity is co-created in SMEs. The study provides empirical data regarding tensions and tension management at the managerial level at SMEs related to ambidexterity.
Keywords
Innovation, ambidexterity, exploitation, exploration, tensions
TIIVISTELMÄ
ITÄ-SUOMEN YLIOPISTO Tiedekunta
Yhteiskuntatieteiden ja kauppatieteiden tiedekunta
Laitos
Kauppatieteiden laitos Tekijä
Marko Parviainen
Ohjaaja
KTT Tero Montonen Työn nimi
KAKSIKÄTISYYS SEKÄ JÄNNITTEIDEN JOHTAMINEN
KASVUHAKUISISSA PIENISSÄ JA KESKISUURISSA YRITYKSISSÄ Pääaine
Innovaatiojohtaminen
Työn laji Pro gradu - tutkielma
Aika 23/11/2020
Sivuja 73 Tiivistelmä
Yritysten on sopeuduttava muutokseen ja samalla hyödynnettävä nykyisiä ominaisuuksia nopeasti muuttuvassa ympäristössä. Kaksikätisesti (eng.
ambidextrous) toimivat yritykset hyödyntävät olemassa olevia vahvuuksia (exploit) nykyisten innovaatioiden hyödyntämisessä ja tutkivat samalla uusia mahdollisuuksia (explore) radikaalien innovaatioiden edistämiseksi.
Tasapainon saavuttaminen olemassa olevien vahvuuksien hyödyntämisen ja uusien mahdollisuuksien etsinnän välillä mahdollistaa aiempaan tutkimukseen perustuen menestyksen, mutta tasapainottaminen on yrityksille haastava tehtävä ja lisää jännitteitä. Aikaisempien tutkimusten perusteella näyttäisi, että haaste on vielä suurempi pienten ja keskisuurten yritysten kohdalla.
Tämän tutkimuksen tarkoituksena on tunnistaa, miten neljässä tapausyrityksessä hallitaan jännitteitä samalla kun olemassa olevien vahvuuksien hyödyntämistä ja uusien mahdollisuuksien etsintää tasapainotetaan. Tutkimuksen informantteina on neljän yrityksen yrittäjänä toimivat henkilöt.
Tutkimus korostaa yrittäjän roolia etulinjan johtajana ja työntekijöiden roolia kaksikätisyyden mahdollistajana. Organisationaalinen kaksikätisyys luodaan yhdessä, eikä kaksikätisesti ajatteleva yrittäjä riitä tämän tavoitteen saavuttamiseksi.
Opinnäytetyö tuo empiiriseen tutkimukseen pohjautuvaa tietoa jännitteistä liittyen kaksikätisyyden tavoitteluun pk-yritysten johtotasolla.
Avainsanat
Innovaatio, kaksikätisyys, vahvuudet, mahdollisuudet, jännitteet
TABLE OF CONTENT
1 INTRODUCTION ... 6
1.1 Ambidexterity and tension management ... 6
1.2 The purpose of the research and research question ... 8
1.3 The structure of the thesis ... 9
2. AMBIDEXTERITY, RELATED TENSIONS AND MANAGEMENT ... 10
2.1 Organizational ambidexterity ... 10
2.1.1 Ambidexterity and the financial performance ... 11
2.1.2 Knowledge requirements related to ambidexterity ... 13
2.1.3 Different forms of ambidexterity ... 13
2.1.4 Towards dynamic and/or individual ambidexterity ... 15
2.2 Tensions related to exploitation and exploration ... 18
2.2.1 The paradox approach turns tensions beneficial ... 19
2.3 Managing tensions ... 21
2.3.1 Organizational design to manage tensions ... 21
2.3.2 Individual level tension management ... 22
2.3.3 Paradox perspective as solution to manage tensions ... 22
2.4 Ambidexterity and tension management in small and medium-sized enterprises .... 25
3. METHODOLOGY ... 27
3.1 Growth oriented companies ... 27
3.2 Case companies ... 28
3.3 Data collection ... 30
3.3.1 Semi-structured interviews ... 30
3.4 Data analysis ... 31
4 NARRATIVES OF AMBIDEXTERITY, TENSIONS AND MANAGING TENSIONS IN
SMALL AND MEDIUM-SIZED ENTERPRISES ... 33
4.1 Story 1: Be a hero, grow passionately ... 33
4.2 Story 2: Tough times do not last, tough teams do ... 36
4.3 Growth oriented entrepreneurs, ambidexterity, and tensions management in small and medium sized enterprises ... 40
4.3.1 Growth-oriented Ulla with a can-do attitude ... 40
4.3.2 Reijo has to first win the trust of his employees ... 41
4.3.3 Chasing ambidexterity and managing tensions at different circumstances ... 41
4.4 Ambidexterity in the narratives ... 44
4.5 Tensions in the narratives ... 48
4.6 Managing tensions in the narrative ... 52
6 DISCUSSION ... 57
6 CONCLUSION ... 61
6.1 Practical and managerial implications of the study ... 62
6.2 Limitations ... 63
6.3 Suggestions for future research ... 63
REFERENCES ... 65
1 INTRODUCTION
1.1 Ambidexterity and tension management
How do organizations survive in the face of change—can organizations adapt, and if so, how? Growth-oriented companies have to renew their business while at the same time keeping the current business viable (O’Reilly & Tushman, 2008). The pace of innovations has been increasing over the years, mainly because of fast technological and global economic development. Even large and widely recognized companies, such as Kodak, have faced difficulties when they have not been able to renew their businesses to the requirements and needs of their customers. Govindrajan and Trimble (2011) argue that this is due to short-term pressure felt by managers while they have to grow earnings every quarter; most are afraid that change could cannibalize their current business. Managers should understand the necessity to cannibalize their own businesses (O’Reilly & Tushman, 1996) in order to enable ambidexterity. To be successful in the race, companies need to efficiently use their current capabilities, refine their offerings, and simultaneously develop new skills and capabilities to innovate radically new products and services. Management research has indicated growing interest in understanding the dynamics of renewing a current business and defines the ability to develop current capabilities and explore new opportunities simultaneously as
“ambidexterity”. The term is adopted from individuals’ ability to use both hands equally well.
Organizational ambidexterity is explained by Duncan (1976) as an organization’s ability to perform differing and often competing strategic activities at the same time. Tushman (1997) states that ambidexterity is about maintaining consistency and encouraging continuous improvement and capability to simultaneously use their existing competences efficiently and search for new (business) opportunities (e.g., Raisch et al. 2009; Andriopoulos & Lewis 2010). These strategic activities are defined in the literature as exploration and exploitation.
March (1991) explains that exploration refers to experimentation and exploring uncertainty, whereas exploitation concentrates on refinement and improving existing capabilities.
Exploitation refers more to fine-grained, incremental progress, and exploration to radical steps in new fields or areas of business. O’Reilly & Tushman (1996) defines exploitation as evolutionary and exploration as revolutionary change. Balancing these two different aspects of development leads to a situation where one has to decide how much one should use resources in each area and the required knowledge available to perform these activities. The
resources used to find new possibilities are not available to develop and refine current capabilities.
Previous research is quite consistent that balancing exploitation and exploration to achieve ambidexterity leads to tensions because of the simultaneous, often conflicting and competing need for the same resources (Lubatkin et al., 2006; Andriopoulos & Lewis, 2009; Gibson &
Birkinshaw, 2004; Smith & Tushman, 2005). Tensions arise at different levels of organization and tend to intensify with scarce resources. The literature is clear that these tensions are difficult to resolve (Zimmermann et al. 2018).
March (1991) states that exploration and exploitation conflict with each other and are difficult to balance (see also Smith & Tushman, 2005; Cao et al., 2009); firms that are able to manage tensions between exploitation and exploration survive and perform better (He &
Wong, 2004). Organizational ambidexterity literature has tried to find a way to efficiently pursue ambidexterity and manage these tensions by specific organizational design (Yu et al., 2020; Raisch & Birkinshaw, 2008), focusing on individuals (Zimmermann et al., 2015; 2018;
Yu et al., 2020), or adopting a paradox mindset (Smith & Lewis, 2011).
Organizational ambidexterity has been an interest of management researchers in the last two decades (Hughes, 2018). Previous literature and research on organizational ambidexterity focused mostly on large enterprises and senior management levels (Cao et al., 2010;
Kauppila, 2010; Raisch et al., 2009; Tushman and O'Reilly, 1996; Lubatkin et al., 2006).
However, there is a lack of research on entrepreneurs in growth-oriented SMEs. The research about tension management at SMEs, while balancing ambidexterity, especially at the individual level, is inadequate (Mom et al., 2007; Gupta et al., 2006).
SMEs are by nature surrounded by uncertainty, and their business models may change rapidly as they strive to grow. The emerging literature on growth-oriented entrepreneurs suggests that little is known about the determinants of growth-oriented entrepreneurs within specific industries (Coad et al., 2014; Autio & Rannikko, 2016), even though SMEs are dynamic actors and play a crucial role in economies. Entrepreneurship and SME studies have been interested in growth (Moreno & Casillas, 2007), as most of the new jobs that are not replacing old occupations are generated by fast-growing companies.
1.2 The purpose of the research and research question
Based on the significant role of SMEs in the economies, it is necessary to understand, from a managerial perspective, how growth-oriented SMEs renew their business by exploring new opportunities and keep their current business viable by exploiting current capabilities.
Although the thesis focuses on SMEs, there are no organizational structures and resources, as in large corporations, that support organizational ambidexterity.
The purpose of this study was to gain new knowledge about tensions management related to exploitation and exploration in growth-oriented SMEs. Entrepreneur-level research about managing tensions in SMEs replenishes the previous research of ambidexterity and tensions on the managerial level (e.g., march 1991; Tushman & O’Reilly, 1996; Andriopoulos &
Lewis, 2009; Nosella et al., 2012; Junni et al., 2013, Schnellbächer et al., 2019; Birkinshaw
& Gupta, 2013; Birnkinshaw & Gibson 2004; Burgess et al., 2015; Kassotaki et al. 2019;
Mammassis & Kostopoulos, 2019).
Previous research has argued that achieving ambidexterity is difficult (Tushman & O’Reilly, 1996), and tensions intensify while operating with scarce resources (Miron-Spektor et al., 2018). The role of frontline managers (Zimmermann et al., 2015; 2018; Yu et al., 2020;
Yeganegi et al., 2019; Bruyaka & Prange, 2020) and managerial level has been underlined as mentioned previously. Scholars have indicated the need for further research on ambidexterity in SMEs (e.g., Voss & Voss, 2013; Lubatkin et al. 2006), in contrast to ambidexterity research conducted on large companies (Andriopoulos & Lewis, 2009;
Tushman & O’Reilly, 1996). This theoretical background creates a context for the thesis to explore growth-oriented SMEs with entrepreneurs as informants and works as a framework for defining the research question and sub-questions of the thesis.
Research question: How does an entrepreneur in a growth-oriented small and medium-sized enterprise balance exploration and exploitation?
Research sub-question 1 (SQ1): What kind of tensions related to exploitation and exploration can be identified in SMEs?
Research sub-question 2 (SQ2): How do entrepreneurs manage these tensions?
1.3 The structure of the thesis
The first chapter of the thesis is an introduction to the background, the key concepts of the study, and the structure of the thesis. The second chapter includes the theoretical background of organizational ambidexterity, tensions between exploration and exploitation activities, and how tensions are managed. The third chapter introduces the methodology, including an explanation of the methodological approach used and how the data was collected, including a short description of each case company, and a description of how data were analyzed. In the fourth chapter, research results are presented. The conclusions of the thesis include a summary of the findings, an explanation of the limitations of the research and suggestions for future research.
2. AMBIDEXTERITY, RELATED TENSIONS AND MANAGEMENT
Figure 1: Tensions arise while balancing exploitation and exploration to achieve organizational ambidexterity in a company.
2.1 Organizational ambidexterity
Organizational ambidexterity means an organization’s ability to perform differing and often competing strategic activities at the same time (Duncan, 1976). Ambidexterity is about maintaining consistency and encouraging continuous improvement (Tushman, 1997;
Tushman & O’Reilly, 1996). March (1991) describes ambidexterity as exploration and exploitation, and explains exploration as new possibilities that are yet to be known, whereas exploitation is old certainties, what firms already know. Similarly, Raisch et al. (2009) state that ambidexterity is the capability to simultaneously exploit existing competencies and explore new opportunities. Tushman and O’Reilly (1996) state that exploration illustrates radical innovation and exploitation incremental innovation. Organizational ambidexterity is seen as an organization’s ability to compete in mature markets performing incremental improvements and to also compete in new markets where experimentation is needed (O’Reilly & Tushman, 2013). Gibson and Birkinshaw (2004) conceptualize ambidexterity as “a multidimensional construct comprised of the nonsubstitutable combination of alignment and adaptability”. There are still some voices who are not willing to separate exploration and exploitation into different dimensions, but see them as part of the same continuum (Gupta et al., 2006).
Ambidextrous companies are able to exercise their dynamic capabilities and at the same time balance explorative and exploitative innovations to meet market demands (Duncan, 1976;
March 1991; Tushman & O’Reilly, 1996). Hughes (2018) lists 16 different definitions of organizational ambidexterity in organization and management studies. Recurring elements
Exploration Exploitation
Organizational ambidexterity
Tensions while balancing exploration
and exploitation
of previous research consist of firm survival, managing tensions, and magnitude of ambidexterity.
Exploitation is needed by a firm to be able to explore new capabilities, but exploration is also a key to enhancing current capabilities (Katila & Ahuja, 2002). Firms must engage in sufficient exploitation to ensure its current viability and, at the same time, explore to ensure its future viability. Exploration requires firms to sense and seize new opportunities and perhaps stretch or transform their current capabilities or develop new capabilities (Capron &
Mitchell, 2009). Andriopoulos and Lewis (2009) state that exploitation is connected to the profit emphasis and to the strategic intent, whereas the exploration side is connected to the breakthrough emphasis.
Tushman and O’Reilly (1996) argue for the need for multiple structures. Having multiple structures helps to cope with differing activities of exploitation and exploration. Over time, company structures, systems, and culture seem to interlink and become more complex so that change becomes more difficult, costs more, and requires more time to execute. Large firms have some scale and scope benefits against smaller firms. They could use marketing and manufacturing resources more efficiently. Large firms could beneficially use multiple structures to achieve employee satisfaction—multiple structures might help employees to feel a sense of ownership and responsibility for their own results. Tushman and O’Reilly (1996) describe an ambidextrous firm as a firm that has the capabilities to simultaneously both compete in mature markets and develop new products and services for emerging markets. Voss and Voss (2013) state that SMEs have more limited ability (than large corporations) to create multiple structures between exploration and exploitation. SMEs have more limited opportunities to create suitable conditions for innovations and commercialize those (Felicio et al., 2019). In a large corporation, competing and conflicting operations could be separated into different business units, and a proper amount of resources can be focused on each unit at a time to support them.
2.1.1 Ambidexterity and the financial performance
March (1991) states that exploitation is surrounded by a low level of uncertainty and has high rates of success. Govindarajan and Trimble (2011) state that chief executive officers are willing to focus on short-term success that delivers reliable revenues and profits. Gupta et al.
(2006) state that exploitative activities provide customer demand and profits. Exploration by contrast is connected to high levels of uncertainty and low success rates. This means that in the short term, firms could expect more reliable returns by focusing on exploitation.
For the organization’s long-term survival, it is vital to exploit current capabilities and simultaneously explore new competencies. The latest research on ambidexterity has emphasized simultaneously performing exploitation and exploration activities with similar intensity. He and Wong (2004) tested the ambidexterity hypothesis, stating that when exploitation and exploration are balanced, possibilities for firm survival and performance are improved, which is in line with Voss and Voss (2013). Nickerson and Zenger (2002) state that “ambidexterity suggests that the benefits of crafting somewhat conflicting organizational structures exceed the costs of doing so”. Uotila et al. (2009) argue that the balance of exploitation and exploration might be less important in environments characterized by low technological dynamism. Previous literature emphasizes the need for organizational ambidexterity to establish a competitive advantage, positive sales growth, and survival (He
& Wong, 2004; O’Reilly & Tushman, 2013; O’Reilly & Tushman 2011; Blindenbach- Driessen & van den Ende, 2014).
Junni et al. (2013) found in their meta-analysis that organizational ambidexterity is positively and significantly associated with performance; however, they also remind us of the truth that the empirical evidence of the effects of organizational ambidexterity is mixed. They call for further research and empirical evidence on organizational ambidexterity to understand its benefits and disadvantages. Tushman and O’Reilly (1996) remind us that it is very difficult to achieve ambidexterity and sustain it in the long term. Atuahene-Gima (2005) argues that the attempt to achieve ambidexterity does not benefit radical or incremental innovation performance and actually harms radical innovation performance. Ebben & Johnson (2005) and Van Looy et al. (2005) argue that there are problems while chasing organizational ambidexterity. They point out that there is duplicative work and ineffectiveness while trying to balance ambidexterity. Hughes et al. (2018) researched 384 family-owned firms and identified that exploitation is a key ingredient of family firm performance. Uotila et al. (2009) studied large firms on S&P 500 and found that there is evidence of a positive correlation between the relative amount of exploration and financial performance. They also argue that the interaction between exploration and industry R&D intensity can be linked to financial performance. Úbeda-García et al. (2020) suggest performing exploration and exploitation
activities simultaneously. They argue that this minimizes the risk associated with either an excessive amount of exploitation or exploration. Tushman and O’Reilly (1996) do not suggest focusing only on exploitation and incremental improvements in the cost of exploration and focusing on long-term success.
2.1.2 Knowledge requirements related to ambidexterity
Based on the literature, the main challenge for ambidextrous organizations is simultaneously managing existing knowledge and new knowledge while ensuring better products and services and achieving organizational development (e.g., Birkinshaw & Gupta, 2013;
Nosella et al., 2012; O’Reilly & Tushman, 2008). Markides (2013) states that ambidexterity leads to a situation where a company has the challenge of simultaneously competing with two conflicting business models. Implementation of ambidexterity is difficult because exploitation and exploration require different organizational learning models, architectures, and processes (Voss & Voss, 2013). Ambidexterity is connected to a balance of organizational learning based on exploration and exploitation (He & Wong, 2004; Katila &
Ahuja, 2002). Lin et al. (2013) argue that firms should focus on enabling their learning capability by facilitating internal learning and external partnering and creating an open organizational culture. This leads to a situation that allows simultaneous chasing of exploration and exploitation and efficient incremental and radical innovation development.
Capron and Mitchell (2009) suggest that as firms consider developing their capabilities, they should consider constraints or barriers based on their current capabilities and accept new knowledge as they decide whether to focus on internal development or external sourcing.
Katila & Ahuja (2002) argue that exploring new capabilities can be seen useful for firms to enhance their existing knowledge base.
2.1.3 Different forms of ambidexterity
Ambidexterity is usually divided in the literature into three different forms: 1) contextual ambidexterity, 2) structural ambidexterity, and 3) interorganizational ambidexterity. In contextual ambidexterity, companies are organized in such a way that allows freedom for employees to execute exploration and exploitation activities (Birkinshaw & Gibson, 2004;
Gibson & Birkinshaw, 2004; Wang & Rafiq, 2014; Úbeda-García et al., 2020). These activities can be done without limiting time or allowing only certain business units to focus on these activities. In some companies, employees are given freedom for exploratory projects
of their own (Chen, 2017). van Assen (2020) states that to foster contextual ambidexterity, it is not enough to have employees empowered, it is also important to have management committed to continuous improvement. Gibson and Birkinshaw (2004) underline the importance of the activities of individuals in the organization to achieve ambidexterity, and Birkinshaw and Gupta (2013) state that organizational ambidexterity relies on single individuals who engage in exploration and exploitation. Yu et al. (2020) argue that there is lack of research on individual-level ambidexterity, and they state that efficiency, self- efficacy, and flexibility are needed to achieve individual ambidexterity.
Gibson and Birkinshaw (2004) state that authors have typically viewed ambidexterity in structural terms. In structural ambidexterity exploration and exploitation are divided between different business units that are coordinated by top managers (O’Reilly & Tushman, 2004;
2011). Hughes (2018) argues that previous research focuses mainly on the firm or business unit level (e.g., Duncan, 1976; March 1991; Tushman & O’Reilly, 1996; Gibson &
Birkinshaw, 2004; He & Wong, 2004; Jansen et al., 2006; Lubatkin et al., 2006;
Andriopoulos & Lewis, 2009; Cao et al., 2009; Simsek, 2009; Nosella et al., 2012;
Birkinshaw & Gupta, 2013). Based on Hughes (2018), research related to the tension between exploitation and exploration has been previously covered by March (1991), Tushman and O’Reilly (1996), Andriopoulos and Lewis (2009), and Nosella et al. (2012), Birkinshaw & Gupta (2013) and Junni et al. (2013). Mom et al. (2007) state that some managers engage more in exploration activities than exploitation, or vice versa, and some managers engage both exploration and exploitation at the same time. Structural ambidexterity places exploration and exploitation into structurally separated business units rather than expanding both to the company level (O’Reilly & Tushman, 2004, 2011;
Tushman & O’Reilly, 1996; Jansen et al., 2009; Úbeda-García et al. 2020).
Ambidexterity could also be developed through interorganizational relations through co- exploration and co-exploitation, using other organizations’ resources (e.g., partnerships) to achieve ambidexterity and uniting benefits from contextual and structural ambidexterity (e.g., Úbeda-García et al., 2020; Kauppila, 2010; Nosella et al., 2012; Wilden et al., 2018).
Rothaermel and Deeds (2004) and Rosenkopf and Nerkar (2001) connect exploration and exploitation with strategic alliances to understand more deeply the benefits of alliances in balancing uncertainty, resources and gaining results to obtain more products in development and to the market. In SMEs with scarce resources, using different kinds of
partnerships, advisors, or other strategies are cost efficient and flexible ways to bring knowledge to the organization. The firms could benefit from external resources to develop their capabilities on either exploitation or exploration.
Some scholars (Chen, 2017; Insead & Levinthal, 2004; Boumgarden et al., 2012) emphasize the sequential method. In sequential ambidexterity, companies can focus more on exploitation or on exploration for a certain period, which, in this case, means exploitation and exploration are not done simultaneously (Chou et al., 2018; Nölleke-Przybylski et al., 2019; Boumgarden et al., 2012). Nickerson and Zenger (2002) examined Hewlett-Packard and evolvement of the company during 25 years in terms of exploration and exploitation and found that during different periods, the company had shifted its structure significantly to either focus more on exploration or exploitation. Chou et al. (2018) suggests that firms should have the capability to shift between exploration and exploitation and argue that it has a positive effect on the performance of new products. However, ambidexterity has been defined as simultaneous exploration and exploitation by the majority of organizational ambidexterity research (Gupta et al., 2006; Raisch & Birkinshaw, 2008).
2.1.4 Towards dynamic and/or individual ambidexterity
The different viewpoints about ambidexterity discussed above have limitations, particularly in suggesting that the phenomenon be approached from a particular perspective. For example, some scholars (Úbeda-García, 2020; Chen, 2017) have suggested dynamic ambidexterity as a solution to utilize all forms of ambidexterity at different organization levels and interplay between exploitation and exploration (Zimmermann et al., 2018). This requires implementing multiple strategies, processes and structures to support exploration and exploitation activities and to support all previously mentioned forms of ambidexterity (Chen, 2017). Chen (2017) states that dynamic ambidexterity utilizes structural ambidexterity at the corporate level, contextual ambidexterity at the business unit level, and sequential ambidexterity at the project level. Thus, insights, practices, and benefits can be combined. In some terms, ambidextrous organizations can be seen as the capability to simultaneously execute knowledge management processes (Lubatkin et al., 2006).
Volery et al. (2015) conducted an observation study on six growth-oriented entrepreneurs and introduced six behavioral listed by Volery et al. (2015) are 1) support ambidexterity by building and maintaining boundary-spanning relationships, 2) ensuring that they do not focus
solely on exploitation, but reserve time for exploration, 3) creating platforms allowing discussion about exploration and exploitation related issues, 4) emphasizing convergent and divergent thinking, 5) switching back and forth between task-oriented and change-oriented activities, and 6) shifting the focus of the organization from exploration to exploitation and vice versa, as the current situation requires.
Volery et al. (2015) states that ambidexterity as dualism suggests that either exploration or exploitation are engaged, and this creates tension because allocation of time and priorities has to be decided. Focusing on each pole of ambidexterity creates tension, as entrepreneurs must decide proper allocation of their time and priorities between conflicting demands. They suggest that if one should choose between exploitation or exploration, exploitation is prioritized. The reason for this relies on the nature of exploitation. The returns expected from exploration are seen as more uncertain and distant in time than returns that are expected from exploitation. Exploitative activities are seen to provide fast and more reliable profits. It seems, therefore, that entrepreneurs tend to get sucked into short-term operational activities.
Mom et al. (2009) explains that a manager’s decision-making authority is positively related to ambidexterity.
The interest of ambidexterity research has shifted in recent years from structural ambidexterity, which supports the creation of separate structures between exploitation and exploration functions (Gibson & Birkinshaw, 2004; Tushman & O’Reilly, 1996), to dynamic or individual-level ambidexterity (Zimmermann et al., 2015; 2018; Yu et al., 2020; Úbeda- García, 2020; Chen, 2017; Yeganegi et al., 2019; Bruyaka & Prange, 2020), underlining the role of employees and frontline managers in achieving ambidexterity. Mammassis and Kostopoulos (2019) researched the motivational aspect of ambidexterity among chief executive officers (CEOs) and state that goal orientation of the CEO may facilitate or reduce ambidexterity.
Based on previous literature, the benefits of balancing both exploitation and exploration activities seem to be inconsistent, and the benefits of focusing too much on either exploitation or exploration seem to be mixed. There are also critics stating that prior research has not offered answers to what organizations have to do to simultaneously pursue exploitation and exploration (Lin et al. 2013). There are different forms of how previous literature has tried to apply ambidexterity to organizations. At large corporations, there are more options than in small and medium-sized businesses, and exploitation and exploration tasks can be done in
different units. However, in SMEs, there might be no separate structures or resources available to create separating units; balancing ambidexterity might be simultaneous and equal between exploitation and exploration, or ambidexterity can be pursued sequentially over time. Dynamic ambidexterity has received growing attention in organizational ambidexterity research, emphasizing not choosing one, but rather multiple strategies at different parts of the organization. Further, the interest of researchers in recent years has been focused on individuals as actors and enablers of ambidexterity and the role of management in achieving ambidexterity. Table 1 represents relevant previous research about the different perspectives of ambidexterity regarding the thesis.
Table 1. Different aspects of ambidexterity in previous literature
Perspective Researchers
Structural Gibson & Birkinshaw (2004), Tushman &
O’Reilly (1996), Gibson & Birkinshaw (2004), Jansen et al. (2006), Voss & Voss (2013), Gibson & Birkinshaw (2004), He &
Wong (2004), Jansen et al. (2006), Lubatkin et al. (2006), Andriopoulos &
Lewis (2009), Cao et al. (2009), Simsek (2009), Nosella et al. (2012), Birkinshaw &
Gupta (2013)
Interorganizational Úbeda-García et al. (2020), Kauppila (2010), Nosella, et al. (2012), Wilden et al.
(2018), Rothaermel & Deeds (2004), Rosenkopf & Nerkar (2001)
Contextual Birkinshaw & Gibson (2004), Gibson &
Birkinshaw (2004), Wang & Rafiq (2014), Úbeda-García et al. (2020), van Assen (2020)
Sequential Chen (2017), Insead & Levinthal (2004), Boumgarden et al. (2012), Nölleke- Przybylski et al. (2019), Nickerson &
Zenger (2002), Chou et al. (2018)
Dynamic Úbeda-García (2020), Chen (2017), Zimmermann et al. (2018), Lubatkin et al.
(2006)
Knowledge Katila & Ahuja (2002), Birkinshaw &
Gupta, (2013), Nosella et al. (2012), O’Reilly & Tushman (2008), He & Wong, (2004), Capron & Mitchell (2009), Zimmermann & Raisch (2009)
Simultaneously performing exploitation and exploration
Voss & Voss (2013), Nickerson & Zenger (2002), He & Wong (2004), O’Reilly &
Tushman (2013), O’Reilly & Tushman (2011), Blindenbach-Driessen & van den Ende (2014), Junni et al. (2013), Úbeda- García et al. (2020), Gupta et al. (2006), Raisch & Birkinshaw (2008)
Ambidexterity is hard to achieve and/or its benefit is mixed
Tushman and O’Reilly (1996), Atuahene- Gima (2005), Junni et al. (2013), Ebben &
Johnson (2005) and Van Looy et al. (2005) Differences regarding certainty of returns
between exploitation and exploration
March (1991), Govindarajan & Trimble (2011), Smith & Shalley (2006)
2.2 Tensions related to exploitation and exploration
Organizational ambidexterity literature has quite a consistent understanding that balancing exploration and exploitation leads to tensions (Lubatkin et al., 2006; Andriopoulos & Lewis, 2009; Gibson & Birkinshaw, 2004; Smith & Tushman, 2005) that are difficult to resolve (Zimmermann et al. 2018). Managers experience tensions as a dilemma when they balance exploration and exploitation activities without being able to choose between competing and conflicting activities. Managers are usually unable to see both exploration and exploitation as a possibility (Smith & Lewis, 2011; Lüscher & Lewis, 2008). Andriopoulos and Lewis (2009) studied five ambidextrous firms in the product design industry and found overarching patterns. Their research supports previous research (March, 1991; Smith & Tushman, 2005) arguing that exploitation-exploration conflicts have an effect on multiple levels on
organization and also on personal level, and that managing tensions requires efforts on multiple levels by management. Tensions arise among employees when they explore new uncertainty and are not aware of the next phases or how they should adapt to the situation (Andriopoulos & Lewis, 2009). Simsek (2009) states that a firm or its units have to shift structures to explore new opportunities and execute innovation. Tensions follow this shift also because the structures needed for exploration and exploitation are distinctive. Tensions intensify under conditions of resource scarcity (Miron-Spektor et al., 2018). He and Wong (2004) argue that the inherent tension may become impossible to manage when exploration and exploitation are pushed too far. Tensions occur when there is dependency between both radical and incremental innovation at the project (Smith & Lewis, 2011). Zimmermann (2018) states that most of the previous literature has addressed tensions as stable; however, they found in their empirical research that tensions on the frontline evolve across domains.
Andriopoulos and Lewis (2009) divide tensions into three categories: strategic intent, customer orientation, and personal drivers. Raisch et al. (2009) identify four tensions related to ambidexterity. The first tension is related to differentiation and integration. The conflict between differentiation and integration is in deciding whether to have different organizational units focusing on exploitation and exploration rather than integrating capabilities and resources within the same unit (Gibson & Birkinshaw, 2004). The second tension is based on whether ambidexterity manifests itself at the individual or organizational level. To enable ambidexterity at the individual level, organizational mechanisms may be required. The third tension relates to the static versus dynamic perspective. Some research suggests that sequential attention is needed on exploitation and exploration, although the majority of previous organizational ambidexterity research suggests organizations simultaneously pursue exploitation and exploration. The fourth tension relates to internal versus external perspectives on ambidexterity (e.g., how organizations address exploitation and exploration internally and the importance of the external acquisition of new knowledge for exploration). Previous research on organizational ambidexterity has focused on companies’ internal aspects of exploitation and exploration.
2.2.1 The paradox approach turns tensions beneficial
The paradox approach has lately received growing attention among researchers (Schad et al., 2019), and it has been used in recent research as a lens to examine ambidexterity—
performing exploitation and exploration simultaneously (Gibson & Birkinshaw, 2004;
O’Reilly & Tushman, 2008; Raish & Birkinshaw, 2008; Smith & Lewis, 2011). McMullen and Bergman (2017) state that paradox theory is ideal for examining organizational tensions.
Paradox theory was originally aimed at the organization level, but it can be applied at various other levels, including individuals, teams, and organizational and interorganizational levels (Miron-Spektor et al., 2018; Ocasio & Radoynovska, 2016; Schad et al., 2016). Paradox illustrates two elements that are true and exist simultaneously in the same place, at the same time (Lewis, 2000). Paradox scholars see tensions as double-edged swords, potentially as sources for innovations and enhanced performance, but also raising anxiety (Lewis, 2000).
Fairhurst et al. (2002) and Stohl and Cheney (2001) define paradoxical tensions as a clash of ideas, principles, and actions, as well as any subsequent feelings of discomfort. Smith and Lewis (2011) state that the paradox perspective assumes that tensions persist within complex and dynamic systems, and tensions can be beneficial and powerful. Smith and Jarzabkowski et al. (2013) note that managers’ shift from defensive responses to active responses leads to a paradox. The paradox perspective explores tensions across phenomena and levels. Based on previous literature, Jarzabkowski (2013) describes that paradox is quite common among teams or groups because there is separation between different values, beliefs, and identities.
As people from different groups communicate with each other, they also have to match the values of their own group with those of other groups.
Schad et al. (2016) state that tensions arise from four paradoxes, including learning paradoxes which arise from the old and new stability and change (e.g., Smith & Tushman, 2005; Raisch & Birkinshaw, 2008; Andriopoulos & Lewis, 2009). Learning paradoxes appears as dynamic systems change, renew, and innovate. Tensions arise between radical and incremental innovation or episodic and continuous change. Jarzabkowski (2013) states that during change, all actors and organizations struggle, but also learn as new procedures are approached (Clegg et al., 2002). Organizing paradoxes describe how firms create processes and designs to achieve their goals (Gibson & Birkinshaw, 2004; Smith &
Tushman, 2005). Organizing paradoxes are common where complex systems lead to competing designs and processes. Tensions arise between collaboration and competition as well as between routine and change. Tensions are present especially while restructuring because change induces tensions between old and new structures (Lüscher & Lewis, 2008;
Smith & Lewis, 2011). Belonging paradoxes describing competing identities and tensions between the individual and the collective. Performing paradoxes arise because of different
demands from inside and outside the company, e.g., if there are competing strategies or goals between different stakeholders. It is natural for performing paradoxes to arise during restructuring, and there is also the possibility that during the major restructuring, managers do not have the blueprints to follow (Jarzabkowski, 2013; Jarzabkowski, 2012).
2.3 Managing tensions
As mentioned, the previous literature is quite consistent that there is a need for tension management in conjunction with ambidexterity. It seems that the importance of tension management is widely recognized as a vital part of achieving ambidexterity (Hughes, 2018;
Andriopoulos & Lewis, 2009; Nosella et al., 2012; Úbeda-García, et al., 2020). These studies suggest that tensions should be handled and resolved at different levels of the organization.
Smith and Lewis (2011) suggest that researchers approaching ambidexterity should focus on tensions, tension management, and implications of tension management. The literature is, however, inconsistent about the methods for handling tension management.
2.3.1 Organizational design to manage tensions
Some scholars suggest that managing tensions should be done on an organizational level by having structures between exploitation and exploration activities and separating these activities from each other. Tensions should be transformed to a competitive advantage by creating an organizational design that supports working with conflicting forces (Zimmermann et al., 2018).
According to Tushman and O’Reilly (1996), tension management should be done by structural separation, which separates exploration and exploitation into different business units. Tensions can be managed by building parallel structures, creating, for example, teams that allow switching between different structures according to the needs for exploration or exploitation (Raisch & Birkinshaw, 2008), or temporal balancing or temporal separation by separating different units focusing on exploration and exploitation on a temporal basis (Jansen et al., 2005). Zimmermann et al. 2018 did not find evidence in their empirical research that organizational design solves the exploration-exploitation tension.
2.3.2 Individual level tension management
The other level of tension management is the individual level, which focuses on managing tensions on the employee level rather than creating or building structures. The individual-level research is limited, and the majority of recent individual-level research focuses on the paradox approach, as explained later in this section. Individual-level tension management emphasizes the need to understand, within the organization, the demands and characteristics of both exploration and exploitation (O’Reilly & Tushman, 2004), which is supported by Mom et al.
(2007) argued that a manager’s role in mediating knowledge inflows is important.
Previous literature is inconsistent regarding which managerial level should focus on tension management. Jansen et al. (2009) and Zimmermann et al. (2018) argue that top management has an important role in managing tensions. Montealegre et al. (2019) state that different management levels (top managers, middle managers, and operational managers) have to address tensions arising at different phases. Further, there is inconsistency on which managerial levels are affected by the tensions. Andriopoulos and Lewis (2009) and Smith and Tushman (2005) argue that managers in product development organizations experience tensions, given that they need to constantly develop their current products and at the same time create innovations that may cannibalize those. Voss and Voss (2013) state that tensions related to product and market functions occur more with frontline managers. Zimmermann et al. (2018) states that frontline managers experience tensions on a daily basis. He and Wong (2004) have a practical suggestion; tensions between exploration and exploitation should be addressed on a continuous basis by managers.
2.3.3 Paradox perspective as solution to manage tensions
To manage tensions efficiently while balancing ambidexterity, it is necessary to understand the characteristics of tensions related to exploitation and exploration. Managers experience tensions as a dilemma when they balance exploration and exploitation activities without being able to choose between competing activities. Smith and Lewis (2011) offer contingency theory as one response to tensions. Contingency theory focuses on favorable conditions for selecting among competing demands, which means that if a certain condition is true, then the selection will be made, indicating a choice among competing tensions. On the contrary, the paradox perspective relies on choosing both alternatives of competing and often conflicting options.
Based on Lüscher and Lewis (2008), managers would benefit from understanding the paradoxical nature of tensions to appropriately manage them. They found that even when managers initially experienced tensions as dilemmas, helping them to accept tensions as an inherent part of ambidexterity enabled their sensemaking. When managers realized that they were not able to choose between competing tensions, they began to adopt paradoxical thinking, meaning that they were open to discussion considering all possibilities rather than choosing one to consider. Smith and Lewis (2011) distinguish paradoxes from similar organizational tensions, such as dilemmas and dialectics, highlighting the core characteristics of paradox (Cornforth, 2004; Lewis, 2000). They state that paradox approach presumes tensions to be natural and permanent part of the dynamics and if the organization is able to response to these, long-term sustainability is enabled. From a management perspective, it is valuable if individuals are able to judge the meaning and value between these conflicting and opposing options and can identify potential synergies; individuals seem to accept paradox more likely in this way They argue that tensions between exploration and exploitation illustrate the nature of paradox and its contrast with dilemmas and dialectics; to be able to measure valued differences between competing forces and understand potential underlying synergies, managers are more likely to embrace paradoxical ways of thinking. The paradox perspective managing tensions relies on long-term sustainability and continuous efforts to meet multiple, divergent demands (Lewis, 2000; Miron-Spektor, 2018).
Miron-Spektor et al. (2018) highlights the necessity of having a paradox mindset within the organization as a key to unlocking the potential of everyday tensions. Their research contributes to the work of Smith and Lewis (2011) by providing a new explanation for the relationship between tensions and paradox mindset. They argue that people with limited time and funding and such resources experience tensions, and some individuals are able to leverage tensions and competing demands to their benefit, whereas others are unable to do so. Some employees can cope and even thrive with everyday tensions. They argue that paradox mindset has an effect on the relationship between experiencing tensions and in-role performance, stating that high paradox mindset leads to higher in-role job performance. A higher scarcity of resources leads to a higher level of experienced tension.
Jarzabkowski et al. (2013) describes four different ways to manage paradoxical tensions: 1) suppressing—one element is prioritized and allowed to dominate or overrule the other
element; 2) opposing—response involves parties supporting contradictory elements of paradox engaging in active confrontation and conflict that polarize paradoxical elements; 3) splitting—separation of contradictory elements either temporally or spatially; and 4) adjusting—recognizing that both poles are important, interdependent, and both need to be accommodated.
Smith and Lewis (2011) introduce the dynamic equilibrium model as a solution to manage tensions, stating that by understanding the permanent nature of tensions and having awareness of tensions, it is possible to achieve acceptance and paradoxical thinking instead of defensiveness. They argue that tensions can be seen as opportunity. If the individuals are able to look at the value between exploitation and exploration and identify possible synergies, the acceptance is higher than the rejection. They also suggest approaching tensions with different management strategies and consider the impact of these strategies on sustainability.
According to them, the virtuous cycle of managing tensions helps to achieve short-term excellence while ensuring long-term success. They state that dynamic equilibrium enables sustainability by stimulating learning, creativity, flexibility and resilience, and by unleashing human potential.
Zimmermann et al. (2018) argue that managing tensions can be done by collective systems and processes. As a practical example, frontline managers could configure the message from the top to match the informal culture of manufacturing or production. This differs from previous literature (Smith & Lewis, 2011; Andriopoulos & Lewis, 2009) and does not suggest that managers carry tensions or that organizational structure is a solution to overcome the mentioned tensions.
The various ways and methods by which tensions can be managed while balancing ambidexterity based on the literature are listed in Table 2.
Table 2. Tension management suggested by previous literature Method to manage tensions Researchers
Solved at different levels of organization Hughes (2018), Andriopoulos & Lewis (2009), Nosella et al. (2012), Úbeda- García, et al. (2020)
Focusing on organizational design Tushman & O’Reilly (1996), Raisch &
Birkinshaw (2008), Jansen et al. (2005).
Managing tensions at individual level Mom et al. (2007), Zimmermann et al.
(2018), Montealegre et al. (2019), He &
Wong (2004)
Paradoxical approach Lüscher and Lewis (2008), Smith and Lewis (2011), Lewis (2000), Miron- Spektor (2018), Jarzabkowski et al. (2013)
2.4 Ambidexterity and tension management in small and medium-sized enterprises The theoretical framework in this study is based on organizational ambidexterity, tensions, and tension management. The purpose of this thesis was to understand the organizational ambidexterity of growth-oriented SMEs from the viewpoint of entrepreneurs.
The ambidexterity in the context of SMEs has been studied previously by several researchers (Volery et al., 2015; Voss & Voss, 2013; Felicio et al., 2019; Lubatkin et al., 2006; Berard
& Fréchet, 2020). However, there is a lack of empirical data about SMEs and especially having entrepreneurs as informants. The research about tensions related to SMEs while balancing ambidexterity is inadequate (Mom et al., 2007).
Previous literature suggests, for example, structural ambidexterity as an answer to managing tensions while balancing ambidexterity. There are limitations to balancing ambidexterity and managing tensions with scarce resources. Voss & Voss (2013) indicate that SMEs have limited ability to create multiple structures between exploration and exploitation compared to large corporations. They state that mature firms probably have the resources, capabilities, and experience that is needed in order to implement ambidexterity successfully, while smaller firms may not have same advantage.
The research on tension management at the individual level is limited, and the majority of recent research focuses on the paradox approach. Individual-level tension management emphasizes the need to understand the demands and characteristics of both exploration and exploitation (O’Reilly & Tushman, 2004), the manager’s mediating role in knowledge inflows (Mom, 2006), the balance of engagement done by managers (Mom, 2007), and the
role of the manager’s decision-making authority (Mom et al., 2009) related to ambidexterity.
Having growth-oriented entrepreneurs as informants brings more color to the discussion about individual-level tension management.
Prior research suggests that SMEs differ from large firms by their resources or hierarchical administrative systems, resources that benefit from their organizational learning, and ability to create different structures to help manage the tensions associated with balancing ambidexterity (Prajogo & McDermott, 2014; Lubatkin et al., 2006). Berard and Frechet (2020) argue that formalization positively influences exploitation (see also Jansen et al. 2006;
Pertusa-Ortega, 2010) and structural empowerment may help to achieve ambidexterity (Gibson & Birkinshaw, 2004). The research focusing on SMEs and entrepreneurs as informants will provide insights on ambidexterity from the managerial level and information about tension management related to balancing exploitation and exploration with scarce resources.
3. METHODOLOGY
The thesis uses a qualitative approach to achieve a holistic and contextualized description and interpretation (Eriksson & Kovalainen, 2016) of entrepreneurs in growth-oriented SMEs. Qualitative approach offers a better understanding of ambidexterity and tension management from the viewpoint of entrepreneurs.
This thesis applies a case study method to explore complex phenomena: how entrepreneurs balance exploration and exploitation in their companies to achieve ambidexterity, what kind of tensions are related to ambidexterity, and how these tensions are managed. With this approach, it is possible to achieve a deeper understanding of the processes and entrepreneurs’
thinking processes and intentions (Woodside, 2010).
Scholars have argued the need for research on ambidexterity in specific organizational settings and interactions (e.g., Hotho & Champion, 2010; Berard & Fréchet, 2020; Andriopoulos &
Lewis, 2009), and the case study method offers a way to gather empirical data about ambidexterity and tension management in the SME context at the managerial level. With a case study approach, it is possible to present complex business issues in a more understandable way. David and Sutton (2011) argue that the strength of the case study method lies in the time and attention given over to the process and interactions operating within the case.
3.1 Growth oriented companies
The strategy for choosing a case has been a very fundamental issue in qualitative research methodology. Despite the large amount of research on this topic, there is no agreement about the optimal case selection technique (Herron & Quinn, 2016). The purpose of this study was to understand ambidexterity and tension management from the viewpoint of entrepreneurs in growth-oriented small and medium-sized companies.
During my career as an entrepreneur, I met people from different organizations. I have always been interested in growth companies and the characteristics of growth-oriented entrepreneurs. Case selection is based on finding companies that could best fit a defined set of criteria. The case companies are micro or small in terms of size, are growth-oriented and have interesting phases including some kind of development project or change within the company and have faced challenges of the simultaneous pursuit of exploration and exploitation. Three of the case companies were selected from my personal network, and one
case company was new to me and was found in some entrepreneurs’ LinkedIn posts that drew my attention. I contacted the entrepreneurs directly and asked if they would like to participate as a company for my thesis. All the case companies and entrepreneurs are located in Finland.
All the selected companies are micro or small in terms of EU recommendation 2003/361 by the time of research. The EU recommendation suggests that a micro sized company has under 10 employees and has a turnover of under 2 million euros, and a small sized company has over 10, but under 50 employees, and has a turnover of over 2, but under 10 million euros or the balance sheet is a total over 2 million but under 10 million euros (European Commission, 2020).
Three of the companies had a positive, two-digit (13.03–37.77%) compound annual growth rate between 2017 and 2019. One of the companies has a slightly positive (5.68%), one-digit growth rate during the mentioned years. The case companies have headcount between 4 and 15 employees and a turnover of 0.5 to 6.45 million euros (Table 3).
3.2 Case companies
Table 3: Figures of the companies (source: Asiakastieto) Company name Staff
headcount (2019)
Turnover (2019)*
Balance sheet total (2019)*
CAGR 2017- 2019**
Lasilinkki Oy 9 1197 1229 13.03%
Kilatia Oy 4 501 288 37.76%
Medkit Finland Oy 15 6450 2827 37.77%
Peltaco Oy 15 2056 634 5.68%
*) in thousand euros, **) Compound annual growth rate, CAGR Lasilinkki Oy
Lasilinkki Oy, founded in 1983, has undergone major changes in recent years. A third- generation entrepreneur joined the company in 2007 and became the managing director in 2012.
In 2018, the company started major development projects. The projects included brand positioning, development of management systems, and investments in manufacturing and enterprise resource planning (ERP) systems to support growth and internationalization.
During the development process, one expert joined the board of directors to provide valuable insight from outside the company.
Kilatia Oy
Kilatia Oy was founded in 2014 by the current owner and CEO. The company focuses on safety training. The global coronavirus disease pandemic (COVID-19), which started at the beginning of 2020, has heavily affected their sales, and for that reason, the entrepreneur has decided to develop new software solutions for the industry during the time this research was conducted.
The company is going through major development and partial redirection of the business as they develop new software solutions for their customers. The company has also started a new business area by maintaining fire extinguishers in different cities using mobilized units.
Medkit Finland Oy
Medkit Finland Oy was founded in 2008 by the current owner and CEO. The company defines itself as a one-stop shop for healthcare supplies for professionals and consumers. Main competitive advantages are own, experienced importing team, webshop including comprehensive range of products and efficient logistics.
The company has been successful in sourcing new products to its product line and in expanding its offerings during the past years. During the global coronavirus disease pandemic (COVID-19), the company has been prosperous in sourcing personal protective equipment (PPE) from various manufacturers.
Peltaco Oy
Peltaco was acquired by the current entrepreneur at the beginning of 2020. The entrepreneur has background working as production manager and safety manager. He acquired a small company, Sammu-Kaluste, in September 2019, and shortly after (in February 2020), he acquired a larger company and competitor in the same industry, Peltaco Oy. After the later acquisition, he re-structured both companies under the same organization and started to focus on Peltaco brand.
3.3 Data collection
The data was gathered with semi-structured interviews using pre-formulated questions in certain order, and the interviews were conducted one-to-one. The semi structured model is used in explanatory studies and allows the interviewer to define the areas to be explored and pursue an idea or response in more detail; however, it requires the interviewer to know what to find (Saunders et al., 2007; Miles & Gilbert, 2005). Yin (2016) has indicated four potential data collection methods: interviewing, observing, collecting and examining, and feeling.
3.3.1 Semi-structured interviews
The interviews were conducted in a semi-structured way—the researcher had a list of questions to be covered in a certain order. The order of questions varied based on the conversation, and additional questions were asked to explore the research question. A total of four entrepreneurs were interviewed. Two of the discussions were conducted by using video, and two took place on-site. During the interviews, the informants were able to detail their experiences, and the interviewer was able to deepen the discussion. The interviews included three different themes. In the first theme—growth—the interviewer asked informants to describe growth and the role of growth regarding their company, after which the discussion moved to the actions and sources of growth. The second theme of the discussion focused on necessary changes in organization to achieve growth and the concrete actions needed. The third theme was on tensions related to the changes, how these tensions are managed, and whether the tensions differ based on the sources of growth.
The interviews (Table 4) were conducted in Finnish. All the interviews were recorded and transcribed afterwards. Interviews were conducted in September 2020.
Table 4: Duration of the interviews
Company name Duration Interviewee
Lasilinkki Oy 00:37:49 Entrepreneur, 3rd generation
Kilatia Oy 00:45:50 Entrepreneur, founder
Medkit Finland Oy 00:27:05 Entrepreneur, founder
Peltaco Oy 00:51:47 Entrepreneur (by acquisition)
3.4 Data analysis
In qualitative content analysis, the data analysis allows researchers to narrow the focus of attention from the whole text and map descriptive or causal relationships (David & Sutton, 2011; Miles & Huberman, 1994) by different methods to draw a factual description of the data and to describe the phenomena through different categories, comparisons and contrasts (Eriksson & Kovalainen, 2016; Creswell, 1994).
Before the data analysis, the interviews were transcribed verbatim. The data was first organized by creating a table of the questions and corresponding answers. Thereafter, multiple data analysis rounds were performed. The collected interviews were analyzed using qualitative content analysis. The reason for using this method was to determine similarities as well as differences from the material collected. After the interviews, I noticed that three of the case companies seemed to be quite similar in their ambidexterity orientation, and one of the companies differed in this regard.
After the similarities and differences were identified from the answers, the data were categorized by coding chunks of text by highlighting similarities and differences between the texts. At this point, categorization based on exploitation and exploration, tensions and tension management were applied. To decide whether we discussed exploration or exploitation, the logics introduced by March (1991) were applied. Exploitation was described as old certainties, utilizing what the firms already know, and exploration, about topics that are yet to be known. Further, the framing of Tushman and O’Reilly (1996) was applied:
exploration is connected to radical innovation and exploitation to incremental innovation.
Actions related to the current firm and product performance were related to exploitation, and actions related to searching for new opportunities were categorized as exploration action.
Explorative actions were defined to include more risk and uncertainty than exploitative actions.
The results from each interview were summarized, similar outputs were combined with cross-case analysis, and similarities were synthesized. Notably, the summarized result constructs two different kinds of illustrations about ambidexterity in a SME. To synthesize these findings, I decided to write them up as two stories to create a holistic illustration of the case companies’ experiences and interpretations regarding the phenomenon. The stories of two growth-oriented entrepreneurs, Ulla and Reijo, were written to illustrate the ambidexterity and tensions management in SMEs. Story mode allowed me to describe in
detail the everyday activities inside the company about ambidexterity and tension management. Thus, central notions of ambidexterity, tensions related to ambidexterity, and ways to manage tensions were identified. After the stories were written, the similarities and differences in each story were analyzed, followed by an analysis of their ambidexterity, tensions, and tension management. The informal and conversational story mode allows reader to get better insight to the phenomenon and expression of the ambidexterity, tensions and tension management inside the organization.
4 NARRATIVES OF AMBIDEXTERITY, TENSIONS AND MANAGING TENSIONS IN SMALL AND MEDIUM-SIZED ENTERPRISES
4.1 Story 1: Be a hero, grow passionately
Ulla is chasing her passion to create something new and exciting while simultaneously ensuring that the current business is competitive and creating enough cashflow for her exciting endeavors. She understands that the new and uncertain business opportunity might be a failure, but the opportunity is too exciting to pass by. There is a saying that a bird in the hand is worth two in the bush; however, that logic seems to be irrational for Ulla—why be too careful if you can achieve success by pursuing your dreams? Her mother consistently warns Ulla not to put everything behind the same idea and that she needs to take care of the current business. Ulla thinks that the reason for her mother’s warnings was the failure of her uncle, a former director at Nokia mobile division, who does not seem to have recovered ever since the business collapsed. However, Ulla thinks to avoid that path, she would need to be at least a few steps ahead of the competition, and the only way to do that is to be brave and invest in new opportunities.
Ulla has her own target: to double her revenue every year. Rapid growth has changed the company significantly, and its peoples have grown with the company. Ulla has applied her personnel policy for some years for now, and it has been the key to avoiding internal conflicts.
She only hires people of certain types: those who have no fear of change, are strongly self- confident, and are able to adapt to different kinds of situations. Nowadays, although it has more employees, the company looks totally different from five years ago. There are now three different businesses compared to the single one five years ago. About a year ago, she had divided all the businesses into three different business units rather than having them all as one business unit. She tried to separate the team members and run all of these three businesses separately for quick growth and efficient team management. At that time, she felt that was a perfect strategy to develop all of these businesses, given all three are different. However, the strategy did not work. Sales dropped quickly, and she had to re-evaluate her decision. She decided to take everyone back to the one structure system, after which the businesses resumed their growth. The growth has been encouraging and has helped her to go to new business areas. Her target is to grow the current businesses significantly, but at the same time to expand
