Balancing Organizational Capabilities : A case study on how an innovation hub enables startups to balance exploration and exploitation capabilities

Abstract: The world is changing. With more complex products and services available, shortened life cycles, and shifts in customers behavior due to the increased availability of information, companies needs to explore new capabilities and organizational practices to effectively preserve a competitive advantage through new innovations. A competitive advantage is said to be difficult to create and sustain in today’s markets. Many startups and corporates, are therefore, changing their innovation processes from a traditional linear process to more of an open process. Many scholars have studied this phenomenon from a corporate perspective, leaving a gap in existing literature on how startups are contributing with their innovative and entrepreneurial mindset to the context of open innovation. It is visible that startups are possessing an extensive amount of exploration capabilities, while lacking capabilities related to exploitation. Finding a balance between exploration and exploitation capabilities is an issue for startups due to its limitations of resources. Therefore, the purpose of this study is to distinguish how an innovation hub enables startups with balancing exploration and exploitation capabilities. For this study, the innovation hub of our choosing is Ignite. Based on the literature review and the identified research gaps, the following research question has been formulated to investigate the phenomenon of balancing organizational capabilities from a startup perspective: RQ: How can an innovation hub help startups find a balance between exploration and exploitation capabilities? To properly answer the research question, the chosen research approach was selected as a qualitative research method. The empirical findings were gathered from 11 semi-structured interviews, where nine interviews have been with managers from startups active in Ignite and two interviews with team members from Ignite. In addition to the empirical findings, we developed a proposed framework that explains the whole process of startups being active in Ignite from pre-intervention, addressing challenges related to startups and the reasons why they should engage in being active in an innovation hub, to post-intervention, addressing the possible outcomes received by being active in Ignite. To conclude, this thesis contributes with an understanding on how startups may use a third party, such as Ignite, to get help with the balancing act of exploration and exploitation capabilities. The findings show that the third party is helping the startups with balancing their organizational capabilities in an indirect way. This is done through Ignite’s accurate matchmaking process and their deep understanding about which capabilities the big corporations are looking for, which Ignite gathers from a needs analysis together with the big corporation. From this thesis, startups as well as big corporations, will understand the importance of involving a third party for the purpose of creating and sustaining a competitive advantage by balancing their exploration and exploitation capabilities.