Built to Last, Flip or Profit? Exploration-Exploitation and the Survival, Acquisition, and Profitability of Start-ups

67 Pages Posted: 3 Mar 2021

See all articles by Mohammad Keyhani

Mohammad Keyhani

University of Calgary - Haskayne School of Business

Yuval Deutsch

York University - Schulich School of Business

Anoop Madhok

York University - Schulich School of Business

Moren Levesque

University of Waterloo

Date Written: December 31, 2019

Abstract

Exploration-exploitation research to date has understudied the issue of multiple performance dimensions and their potential trade-offs, which leaves the application of its theory to the context of start-ups exposed to blind spots. The importance of acquisition likelihood as a performance outcome in the new venture context calls for nuance in the temporal logic of exploration-exploitation theory, because in this context exploration may be associated with short-term rather than only long-term benefits. In this paper for the first time we investigate the relationship between the exploration-exploitation continuum and profitability, survival and acquisition likelihood simultaneously, and investigate potential trade-offs between these performance dimensions. Using the Kauffman Firm Survey dataset, our results support a balance-is-best approach to exploration for the acquisition likelihood and survival likelihood of high-tech start-ups, and for the profitability of low and medium tech start-ups, but the relationship is linearly negative for the profitability of high-tech start-ups and the survival likelihoods of low and medium tech start-ups.

Keywords: exploration-exploitation, startups, acquisitions, entrepreneurship, corporate strategy

JEL Classification: L20, L21, L22, L23, L24, L25, L26, L29, M10, M13, M19

Suggested Citation

Keyhani, Mohammad and Deutsch, Yuval and Madhok, Anoop and Levesque, Moren, Built to Last, Flip or Profit? Exploration-Exploitation and the Survival, Acquisition, and Profitability of Start-ups (December 31, 2019). Available at SSRN: https://ssrn.com/abstract=3758135 or http://dx.doi.org/10.2139/ssrn.3758135

Mohammad Keyhani (Contact Author)

University of Calgary - Haskayne School of Business ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada

Yuval Deutsch

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Anoop Madhok

York University - Schulich School of Business ( email )

470 Keele Street
Toronto, ON M3J 1P3
Canada
416-736-2100 x20578 (Phone)

HOME PAGE: http://research.schulich.yorku.ca/faculty-profile-details.jsp?id=87&tab=0

Moren Levesque

University of Waterloo ( email )

Waterloo, Ontario N2L 3G1
Canada

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