Strategic renewal within an information technology firm : Exploration, exploitation and corporate venturing

Purpose – The purpose of this paper is to develop an understanding of the effects of existing capabilities, by exploration and exploitation, on the choice between internal corporate venturing and external corporate venturing. Design/methodology/approach – Data from 259 Taiwanese firms in the information technology (IT) sector are collected. The study period is four years: 2003 to 2006. Information on corporate financial data and new ventures from the Taiwan Economic Journal (TEJ) database are collected, as well as patent information from the Taiwan Intellectual Property Office (TIPO). Poisson regression is used to test the hypotheses. Findings – There exists a positive relationship between a firm's existing capabilities and corporate venturing activities. The findings indicate that exploration is a better predictor of internal corporate venturing, while exploitation is better at predicting external corporate venturing. Research limitations/implications – Empirical results are derived from a sampling of information technology firms in Taiwan thus raising issues about their generalizability to other empirical contexts. Practical implications – That internal and external corporate venturing could be complementary is clarified; meaning that each could contribute to a particular type of strategic renewal. For firms that engaged much more in exploration, internal corporate venturing is a better for growth than external corporate venturing; it can leverage existing technologies and keep valuable breakthrough technologies in‐house. In contrast, for firms that focus much more on exploitation, learning externally is a better renewal strategy than venturing internally; it can access and integrate resources trans‐organizationally to create novelty that may serve as avenues for further growth. Originality/value – This is the first study that compares the effects of exploration and exploitation with regard to the decision to engage in internal or external corporate venturing.