Managing Ambidexterity in Growth Phase of Start-Up Firms

Abstract

This thesis explores how startup firms balance the conflicting requirements of exploration and exploitation during their growth phase, i.e., until they reach a stage of maturity when they no longer can be called start-ups. On a survey of literature on the subject, we observed that not much work has been done in this area of how startup firms cope with the dilemma of exploration and exploitation, and how the top management team (TMT) characteristics and actions influence them. In this study, we have tried to address this gap. Exploitation activities are critical for survival and achieving excellence in the present. Exploration activities create potential for sustainable growth in future. Managing this duality is a challenge as they are contradictory in their demands. Ambidexterity refers to the capability of an organization to simultaneously balance these two activities (Gibson & Birkinshaw, 2004; Tushman & O'Reilly, 1996). Certain mechanisms have been proposed in literature such as: structural separation of the two activities, building a supporting context to maintain balanced focus on both these activities at individual level in an organization, and through specific characteristics and actions of the top management team (TMT) to balance these activities at organizational level (Lavie, Stettner, & Tushman, 2010; Raisch & Birkinshaw, 2008). But these studies have been in the context of mature organization and not in the context of start-ups. Startups differ from mature firms in important ways. Many start-ups are based on an original model or idea (the firms we studied were of this kind) and as such, their innovativeness and capability for exploration is the very essence of their raison d'etre. But they are also under pressure to manage the present cash flows and generate early surplus so that they can fund their exploration activities on a sustainable basis. This challenge faced by start-ups does not seem to have been addressed in literature. To address this gap, we have framed our central research question addressed in this thesis as: how is ambidexterity managed in the growth phase of start-ups firms? This study used inductive logic based multiple case study approach (Eisenhardt, 1989; Eisen hardt & Bourgeois lii, 1988; Ei¬senhardt & Graebner, 2007). Four firms from different sectors viz. Info Edge (India) Limited (ITES), Educomp Solutions Limited (Education), Sukam Power Systems Limited [Power back up (manufacturing)], and India Info- line Limited,(BFSI) were selected as sample firms. In-depth interview was the primary data source, supported by multiple secondary data sources. Thematic analysis using coding, table structures, and pattern identification was carried out to arrive at the findings. Findings of the Study First, we found that the founder's inherent ambidextrous orientation and capabilities influences balancing of exploration and exploitation in pre-growth and early growth stage. This capability of the founder along with his/her social network access leads to forming an ambidextrous top management team (TMT), a team which has orientation and capability for both exploration and exploitation activities. Choosing this team for a mix of inherent abilities to manage exploration or exploitation was found to be important, i.e. creating an ambidextrous top management team. Second, we found that different mechanisms were used by startup firms to manage ambidexterity: TMT's posturing for ambidexterity ( behaviour exhibiting signals to the managers below about the orientation of the founder or TMT); divergent and convergent decision making processes; adopting a domain (portfolio) based approach (i.e. mix of activities with one set having focus to create the new, and another set where the focus is exploitative in nature); allowing independent ventures within organization; having exploration and exploitation champions at different levels; and creating the context to support both exploration and exploitation. Third, we found that TMT characteristics, capabilities, and their actions and behaviour influenced the way these mechanisms actually worked, as also the supporting context created to facilitate exploration and exploitation activities. This research Is the first qualitative study on a growing start-up firm context using an ambidexterity lens, and identifies ambidexterity as one of the factors for survival, and sustainable growth of a start-up firm. It provides a framework of the mechanisms through which ambidexterity is managed in a growing start-up firms' context. This research also adds more depth to the discussions on context and leadership antecedents of ambidexterity. For practicing managers, the findings of this research suggest some ways as to how start-up firm managers can manage their survival and aspirations for long term growth side by side.