Bang for the Buck - Resource Allocation for Ambidextrous Innovation

Abstract: In this thesis we explore how accounting can shape ambidextrous innovation strategies, i.e. the simultaneous achievement of both short and long-term innovation. By studying explorative and exploitative innovation efforts, we take an ex-ante perspective on ambidextrous innovation. Drawing upon a single case study in a highly innovative company, we adopt Bower & Gilbert's (2005) resource allocation process (RAP) framework to study how accounting through a decentralised RAP affects innovation ambidexterity. We find that accounting sparks cognitive conflict, thus increasing inter-divisional alignment around innovation efforts. However, as it is difficult to assign numbers to explorative efforts, whereas the opposite is true for exploitative efforts, accounting calculations tend to favour exploitation. Further, we identify two additional sources of accounting-bias favouring allocation of resources towards exploitation. The first source relates to how corporate management allocates accountability. A dependency on resource commitments from exploitative organisational units is likely to create bias for exploitation in ambidextrous units. The second source concerns the short-termism of capital markets favouring exploitation due to the shorter-term, more predictable returns from exploitation compared to those of exploration. Additionally, our findings connect the accounting and ambidexterity literature with research that has studied ambidexterity through organisational structures.