Do Incumbents Really Fail to Innovate? The Role of Exploratory Search and Structural Contexts

Incumbents often experience organizational rigidities when innovating. Prior studies advise these firms to create a single organizational entity outside the mainstream organization that encompasses all exploratory activities. We, however, argue the reverse: incumbents following this design approach become trapped in specific types of exploratory search, thus failing to pursue others. Based on an inductive study, we identify the type of exploratory search as a task contingency for managers' choice of structural context configurations. We find that successful incumbents assign different types of exploratory supply- side and demand-side search to different structural contexts with distinct levels of differentiation and autonomy.