Exploration and exploitation through alliances

The distinction between exploration alliances and exploitation alliances is useful for understanding the configuration of the firm’s alliance portfolio and realizing some of the tradeoffs that a firm encounters in managing its alliance portfolio. Exploration and exploitation can be pursued along multiple alliance domains, such as the value chain function of the alliance and the network position of the partner. Exploration and exploitation correspondingly define the firm’s efforts to seek new opportunities by generating new knowledge and fostering alliances with new partners, versus the firm’s tendencies to leverage existing knowledge and experience with repeat partners. The extent to which the firm’s alliances serve for upstream versus downstream activities of the value chain or feature new versus recurrent partners, depends on the firm’s cooperative strategy and on several organizational and environmental conditions. Although the firm should strive to balance exploration and exploitation in its alliance portfolio, it can also maintain such a balance between its alliance portfolio and its internal organization.