Abstract

This study investigates how technology ventures develop capabilities through the lens of explorative and exploitative learning within and across organizations. We distinguish capability development from product development (involving multiple capabilities), and capability initiation from capability development (involving institutionalization after initiation through repetition). A capability development may take one of the four modes: internal exploration; external exploration; internal exploitation; and external exploitation. Capability exploration refers to the initiation of a new capability that is never possessed by a firm; capability exploitation refers to the improvement and adjustment of an existing capability to adapt to new situations. Capability exploration can occur inside the venture (e.g., R&D capabilities developed in-house), or outside the venture (e.g., relational capability developed through collaboration). A new capability initiated externally through collaboration may stay external or be brought into the venture, adjusted and exploited to meet the venture’s proprietary uses; and vice versa. Therefore, in the case of capability exploitation, the source of the existing capability defines another layer of differentiation: the exploitation of a capability that is initiated through internal exploration, or the exploitation of a capability initiated through external exploration.

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