Exploratory innovation, exploitative innovation and firm performance: Moderating effect of organizational structure and slack resources

As suggested by prior research, there are two types of innovation: Exploratory innovation and exploitative innovation. What is the relationship between the two approaches of innovation and firm performance? We argue that the effect of each approach of innovation on firm performance is contingent upon organizational structure, measured by centralization and formalization, and slack resources, consisted of absorbed slack resources and unabsorbed slack resources. Using data from 155 Chinese manufacturing firms, we show that centralization has a positive moderating effect on the relationship between exploitative innovation and firm performance; Formalization has a negative moderating effect on the relationship between exploratory innovation and firm performance; Unabsorbed slack resources have a negative moderating effect on the relationship between exploitative innovation and firm performance.