Balancing Exploitative and Exploratory Innovation in High-Tech Small- and Medium-Sized Enterprises: The Role of Digitalization and Performance Feedback

Abstract

Balancing exploitative innovation and exploratory innovation, i.e., innovation ambidexterity, is conducive to the survival, adaptation, and prosperity of firms, especially high-tech small- and medium-sized enterprises (SMEs). However, due to their liability of smallness, high-tech SMEs face greater challenges in achieving this balance. While many studies have examined the antecedents of innovation ambidexterity, they do not focus on high-tech SMEs, and the role of digitalization has received scant attention. Integrating the views of dynamic capability and organizational inertia, this study aims to offer novel insights into how digitalization affects the innovation ambidexterity of high-tech SMEs. Using the panel data of Chinese high-tech SMEs from 2010 to 2021, we find that as high-tech SMEs increase digitalization, their innovation ambidexterity first decreases, but then increases. Moreover, this U-shaped effect is found to be flattened by performance shortfall. These research findings offer critical implications for high-tech SMEs on their digital strategies and innovation management.

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