Explore what you exploit: A theoretical process framework of routine replication in contextually ambidextrous organizations

Osterrieder, F., Eberl, M. and Kaiser, S., 2013. Explore what you exploit: A theoretical process framework of routine replication in
contextually ambidextrous organizations. Paper presented at the 33rd Annual International Conference of the Strategic Management Society.
Atlanta, United States of America, September 28th – October 1st, 2013.
EXPLORE WHAT YOU EXPLOIT:
A THEORETICAL PROCESS FRAMEWORK OF ROUTINE REPLICATION IN
CONTEXTUALLY AMBIDEXTROUS ORGANIZATIONS
Based on recent theoretical findings and our multiple-case study of five plant engineering initiatives at
a leading original equipment manufacturer (OEM) for the automotive industry, this paper presents an
extended theoretical framework of routine replication at the business unit level. Prior research suggests
that ambidextrous firms (i.e., simultaneous pursuit of exploitation and exploration activities) can
achieve superior performance. Our research indicates that in a contextually ambidextrous organization,
characterized by discipline, support, trust and stretch, routine replication mediates between the
ostensive and the performative aspects of routines. Assuming a substantial interdependence between
forward and reverse knowledge flow, routine replication thus acts as a source of stability and innovation.
This result demonstrates the strategic value of routine replication for the entire organization.
INTRODUCTION
Organizational ambidexterity is defined as the ability of an organization to exploit its current competencies
while simultaneously exploring new ones (Raisch and Birkinshaw, 2008). Academic research
suggests that, in the long run, ambidextrous firms perform better than firms which cannot cope with
the challenge of simultaneous exploration and exploitation (Raisch and Birkinshaw, 2008; He and
Wong, 2004). Organizational theory links exploration with activities such as search, variation, risktaking,
experimentation, play, flexibility, discovery, or innovation (Burns and Stalker, 1961; Duncan,
1976; March, 1991), whereas exploitation refers to refinement, choice, production, efficiency, selection,
implementation, and execution (March, 1991). According to organizational theory, ambidextrous
firms must pursue both of these contradictory activities. So far, structural and contextual ambidexterity
have been proposed as the two alternative organizational solutions for reconciling exploration and
exploitation (Gibson and Birkinshaw, 2004). In structurally ambidextrous environments, exploratory
activities are separated from other exploitation-oriented activities of a firm (O’Reilly and Tushman,
2004). In contrast, contextual ambidexterity refers to the implementation of an organizational context
that facilitates the pursuit of exploratory initiatives within an existing exploitation-oriented business
unit (Gibson and Birkinshaw, 2004).
Research on organizational routines has been growing for decades, yet there is no integrative understanding
of the concept. Far from it: literature has become a huge reservoir of definitions and views
of this concept, without giving delineation to related fields of research (Cohen et al., 1996; Jones and
Craven, 2001; Becker 2003). Becker (2003; 2004; 2007), however, identified essential traits of routines:
patterns, recurrence, and the collective social nature. Based on a meta-analysis of routine research
and these fundamental traits, Parmigiani and Howard-Grenville (2011) describe organizational
routines “as repetitive patterns of interdependent organizational actions”. Our paper is based on this
understanding.
Generally speaking, due to their repetition, routines are often associated with reduced variability,
standardization, and avoidance of failure (March, 1991). Disregarding some exceptions (e.g., Adler,
Goldoftas, and Levine, 1999; Feldman, 2000), prevailing theories claim that routines lead to mindlessness
(Ashforth and Fried, 1988), deskilling (Leidner, 1993), and inertia (Hannan and Freeman, 1984).
Based on the duality of structure (Giddens, 1984; Latour, 1986), Feldman and Pentland (2003) made a
major contribution to routine research. They proposed a model in which organizational routines consist
of ostensive and performative aspects. According to Feldman and Pentland (2003:94), the ostensive
aspect “embodies what we typically think of as the structure” of a routine, while the performative
aspect “embodies the specific actions, by specific people, at specific times and places, that bring the
routine to life”. The cyclic relationship between these aspects of routines enables it to become a source
of variability and endogenous change.
We adopt this approach and extend it to the replication of routines. Past research defines replication
of routines as a strategic activity that aims to create value for an organization by applying existing
successful routines in new contexts (Nelson and Winter, 1982; Parmigiani and Howard-Grenville,
2011; Winter and Szulanski, 2001; Szulanski and Winter, 2002). This “involves the creation of another
routine that is similar to the original routine in significant respects” (Szulanski and Jensen,
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Explore what you Exploit: A Theoretical Process Framework of Routine Replication in Contextually Ambidextrous Organizations
2004:349). Yet, replication is a complex, costly (Winter and Szulanski, 2001; Szulanski, 1996) and
iterative (Szulanski, and Jensen; 2001) process.
Scholars have organized their research on the replication of routines around two broad themes. On
the one hand, they investigate forward knowledge flows. This implies the transfer from a sending (replicator)
to a receiving unit (replicatee). It is assumed that replicatee organizations do not just replicate
the routine but also try “to ‘break the rules’ and innovate. However, this only has implications for the
overall organization if this knowledge is fed back to other organizational units to make it available for
potential subsequent cycles of replication (particularly important for retail chains, franchising organizations
or globally standardized production facilities)” (Friesl and Larty, 2012). Thus, on the other
hand, scholars focus on reverse knowledge flows as part of the replication process. This feedback loop
could be a source of innovation for the initially replicated routine itself.
Recapitulating research on routine replication, we identified three major research deficits, that we
wish to address in this paper: First, the majority of scholarly work has analyzed the above replication
activities separately (Friesl and Larty, 2012). Second, most research is based on a macro-level perspective
(Foss et al., 2012). Finally, there is a lack of an integrative view on contextual ambidexterity and
the replication of organizational routines. Therefore this paper connects both knowledge flows to form
a new strategically theoretical framework which answers the call for micro-foundational research of
routine replication in an ambidextrous context. This framework contributes to an integrative understanding
of how firms learn and change (Cohen, 2007) by replicating routines in a context characterized
by discipline, support, trust and stretch.
In this paper, we will first outline our methodological approach and describe the five plant engineering
projects in our sample. Then we will present our empirical results and develop a theoretical
process framework. Finally, we will discuss the theoretical contributions of our findings and suggest
potential areas for future research.
METHODOLOGY
As we lack a theoretical understanding of how ambidexterity and routine replication are linked, we
attired to inductively design a theory based on a multiple-case study design (Yin, 2003). For theorydriven
research questions which give insights into processes of routine performance and routine replication,
inductive theory-building based on qualitative data of plant engineering projects has been
found appropriate (e.g., Florida and Kenney, 1991; Adler et al., 1999; Adler, 1999). We have chosen
this methodology as it can give insights which quantitative studies cannot reveal in such detail. For our
research, we adopted a process perspective. This is widely accepted as a very effective methodology to
study dynamic phenomena such as innovation or change (Langley, 1999).
Research setting and sampling
Given our research question, we selected plant-engineering initiatives as context for routine replication.
We thus approached CARTECH, a leading original equipment manufacturer with several independent
brands and a strong track record in building plants worldwide. We were able to establish a research
collaboration that allowed us to gain in-depth insights into the processes of replication in five plantengineering
projects. To identify plant initiatives that were suitable for our research objectives, we
conducted several preliminary interviews with corporate managers. This helped us to fulfill the requirements
of theoretical sampling (Eisenhardt, 1989). From each of these sub-samples, we selected
initiatives that had different complexities with regard to people, product and plant. The study of polar
cases helped us to make the emerging constructs and theoretical relationships more “transparently
observable” (Pettigrew, 1990:275). For an overview of our selected sample see appendix 1.
Data collection
As a primary source of data, we conducted semi-structured interviews with a total of 20 respondents
who were interviewed over a one year period, some of them several times. We interviewed between
one and four respondents per plant engineering project, including transfer managers, members of the
management teams of the replicator and the replicatee organization and corporate managers. The interviews
lasted 45 to 120 minutes and were conducted during on-site visits. All interviews were recorded
and transcribed (Eisenhardt, 1989). We relied on a structured interview guide. We were able to
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Explore what you Exploit: A Theoretical Process Framework of Routine Replication in Contextually Ambidextrous Organizations
access multiple confidential documents, complementing our interview data (e.g., process descriptions,
consultant reports, memoranda, and presentations; Creswell, 2008).
Data analysis
Based on Faems et al. (2008), we subjected the data to a multistage process of independent, comparative,
and collaborative analysis, as is considered appropriate for process studies. Firstly, our focus lay
on the information provided by the respondents. Secondly, we looked at the empirical findings through
a theoretical lens. This allowed us to examine the replication processes in detail before building theory
from the ground up (Pettigrew, 1992; van de Ven, 1992). In the first phase of data analysis, all three
authors individually conducted a content analysis on when and how the ostensive aspects of routines
changed. We independently developed visual maps of processes and triggers of transformation. Subsequently,
we compared our initial findings in our sample in order to confirm our observations (Yin,
2003). Finally, all authors addressed the few inconsistencies in their understandings of the empirical
evidence by going back to the data, contacting respondents, and discussing intensively. In the second
phase of data analysis, we developed a theoretical process framework to address our initial research
question (van Maanen, 1979). Initially, all three authors interpreted the data by themselves. We then
discussed, compared, and integrated our individual process frameworks. The final version, which is
presented in this paper, was subsequently discussed with several of our interview partners, who confirmed
our findings.
RESULTS AND THEORITICAL FRAMEWORK
In the following section, we will first present our empirical results which show how the replicator organization
and the replicatee organization develop routines. Due to space limitations, our results from
the case studies are summarized. Then, we extrapolate a theoretical process framework of replication
and reverse replication in a contextually ambidextrous organization.
Empirical results
In the replicator organization, the routine which is to be transferred to another organization “is described
in detail and is functioning well” as one transfer manager said. This is a prerequisite for a routine
to be selected for replication. A special process design team periodically optimizes the routine in
cooperation with workers. Adler et al. (1999) referred to this as meta-routines for systematizing the
creative process and as job enrichment schemes that enable workers to become more innovative and
flexible in their routine tasks (Gibson and Birkinshaw, 2004).
Due to the internationalization of production networks, however, it is necessary to replicate the
existing routines in a new context (Parmigiani and Howard-Grenville 2011; Szulanski and Winter
2002; Winter 1995; Winter and Szulanski 2001; Wirtz et al., 2007). To successfully achieve this, routines
have to be partly customized. One manager, who was responsible for routine implementation at
the replicatee organization, explained that for example the total productive maintenance (TPM) routine
was done three times a day at the replicator organization. But due to the shift model at the new plant
this routine had to be adapted at the replicatee organization and was executed “only once a day (…).
This TPM-service then had to be more comprehensive”. Additionally, routines may be changed during
the ramp-up phase and will be better in their performance than in the replicator organization. In that
case it is essential that “that these new routinized procedures flow back to the replicator organization”
as one member of the management team of the replicatee organization said.
To achieve a customized or innovative routine, we observed that a specific context had to be present
in all five plant-engineering projects. On the one hand, there had to be hard elements of the context.
For example, the management team of the replicatee organization expected every member of the
organization to know the codified, standardized production procedures (the so called CARTECH Production
System). To learn these principles, every employee has to undergo five days of training. This
is the “moment of truth”, as one manager described it succinctly. Here the employees get to know the
process as well as quality principles. After that they should know “the CARTECH family inside out”.
At the end, there is a test on knowledge of the CARTECH Production System. If the employee fails,
an improvement plan is developed. Furthermore, during the execution of the routine, fixed output targets
and thus output controls force employees to divide their time between exploiting (the existing
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Explore what you Exploit: A Theoretical Process Framework of Routine Replication in Contextually Ambidextrous Organizations
routine) and exploring (new procedures for the routine). For example, shop floor worker can voluntarily
strive for more (stretch) and can develop to a group leader if they perform better than their peers.
On the other hand, CARTECH extensively analyses the required key competencies for the different
functions in the routine execution and qualification modules. The aim is to perfectly prepare the
employees for their future routine tasks. In order to build the employees’ individual network structures
beyond the site boundary, people from the replicatee organization work in the replicator organization
for a limited time as so-called impatriates. “This is an opportunity to get to know the direct routine
partners in the replicator organization. (…) This is an anchor in the replicator organization, usually a
kind of partnership with experts from the lead factory is built,” as one manager summarized the support,
which is initiated by this contextual antecedent.
Finally, teamwork and mutual trust form another fundamental element that is a key for an efficient
and innovative working environment at CARTECH. Very early on, employees are taught the
principle values that a manager sums up as follows: “We are no lone warriors but a team that works
together. We are both dependent on and responsible for each other. Everybody is committed to help
(…)”. This general attitude towards the working environment is part of the leadership culture which is
taught in fundamental skill development trainings.
The context described above helps the replicatee organization to adapt elements of the ostensive
aspect of routine or to innovate certain elements of the ostensive aspect. If a routine proves to work
better at the replicatee organization (e.g., measured by manufacturing time, rejection rate of production
etc.), a feedback loop to the replicator organization has to be initiated. This can be achieved with a
rotation of key employees in similar functions at the replicator organization. For example the leader of
one training center rotated between a North American and a European plant. Furthermore, benchmarks
and workshops for experts on specific routines foster the reverse knowledge flow at CARTECH. This
was, for example, done for maintenance groups at different plants. Processes and tasks of executive
staff at different plants were compared with each other. The aim was to understand “what others do
differently” and to adapt the routines to the best performance.
Theoretical framework
In the previous paragraphs, we described how routines transformed during the replication between the
replicator and replicatee organization in plant engineering projects at CARTECH. Based on a crosscase
analysis of all five plant engineering projects in our sample, we now present the theoretical process
framework of the transformation of organizational routines (see figure 1).
Figure 1: Process framework of routine replication in contextually ambidextrous organizations.
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Explore what you Exploit: A Theoretical Process Framework of Routine Replication in Contextually Ambidextrous Organizations
The process framework for routine replication in contextually ambidextrous organizations is divided
into four quarters, each containing a routine. The upper left (Q1) and right quarters (Q2) represent
phase one of the framework, i.e. the replication (forward knowledge flow) from the replicator
organization to the replicatee organization. The lower ones (Q3 and Q4) represent phase two, i.e. the
reverse replication (reverse knowledge flow) from the replicatee back to the replicator. Q1 is the starting
point of the replication process. It consists of the existing routine A with its ostensive (OA 1 ) and
performative aspect (PA 1 ). This routine, which is located in the replicator organization, gets transferred
to the replicatee and hence will be exploited there. In the transformation process from the ostensive
aspect (OA 1 ) to the performative aspect of the routine within the replicatee organization, the mediating
role of contextual ambidexterity becomes obvious. Ambidexterity in the replicatee organization
is (indirectly) engendered by four attributes: discipline, support, trust and stretch (Ghoshal and
Bartlett, 1994; Gibson and Birkinshaw, 2004). Consequently, the routine cultivates an altered performative
aspect (PA 2 ) through exploration of the context. If the contextual transformation process
passes an unspecified threshold of a minimum of transformation, a new routine emerges. Routine A +
in Q3 is the starting point of phase two. Here, the new routine is schematized for the first time and thus
a new ostensive aspect emerges (OA 2 ). A new routine, which copes better with the new (and maybe
the original) contextual challenges, is established. We call it routine A + , to highlight its predominance.
Based on our findings and our evolutionary economic background, we assume that only predominant
performative aspects will emerge from contextual cues, otherwise the routine already fits perfectly into
the new environment. The interviewees acknowledged that it might be an iterative process to close the
gap between contextual needs and the routines’ output.
The reverse replication returns the improved routine A + to the replicator organization (Q4). Again
the routine needs to prove itself by exploitation, which comprises exploration of the replicators’ context
too. This might either lead to a fallback on the original routine A or to an improved performance
by using the new refined routine A + .
DISCUSSION
Our inductive case study design allowed us to devise a theory on how firms learn and change by replicating
routines. Some scholars described routines as generative dynamic systems and not static objects
(Pentland and Rueter, 1994; Cohen et al., 1996; Feldman and Pentland, 2003). Yet, previous research
left open the question of how the transformation process is triggered. Our study partly answered this
question. Drawing from our data, we introduce replication and reverse replication as two basic micromechanisms
for the modification process of routines between the replicator and the replicatee organization.
We answered the call for micro-level research to develop a fundamental understanding of the
process. Our results show that forward and reverse knowledge flow need to be analyzed together. Furthermore,
according to Gibson and Birkinshaw (2004), discipline, support, trust and stretch create
contextual ambidexterity in replicatee organizations. Contextual Ambidexterity then mediates the relationship
between the ostensive and performative aspect and acts as a source for the modification of
organizational routines. This result expands on the previous research of Feldman (2000), who found a
continuous endogenous change of the ostensive and performative aspect.
Based on our theoretical findings, we would like to suggest three interesting areas for future research.
Firstly, we strongly encourage scholars to study what fosters the change between ostensive and
performative aspect of routines. Secondly, future studies may consider differences in external contingencies
such as industry or competitive dynamics that may influence the transformation processes in
routine replication. This could not be observed in our single-firm setting. Finally, and this is also a
limitation of our study, the presented framework was inductively developed based on qualitative data,
but our data remains suggestive and our findings should be tested more formally in future scholarly
work.
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Explore what you Exploit: A Theoretical Process Framework of Routine Replication in Contextually Ambidextrous Organizations
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APPENDIX
Appendix 1: Complexities of selected cases (sample).
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