Performance Implications of Exploration and Exploitation in SMEs: the Mediating Role of Interaction Orientation

Purpose This paper aims to explore the complex relationships between knowledge strategies (i.e. exploration and exploitation) and the performance of manufacturing SMEs by testing the mediating role of customer relationship management capabilities, which are defined as a firm’s level of interaction orientation in this study. Design/methodology/approach Following a hypothetical deductive approach and using data collected from 793 French manufacturing SMEs, the measurement model and relationships among the constructs were examined with structural equation modelling, using the partial least squares approach. Findings The results support the expected mediating role of interaction orientation between exploitation and performance, and stress a competitive mediating role between exploration and performance. Complementary analyses demonstrate that while both exploration and exploitation are effectively antecedents of interaction orientation, which also acts as a lever to performance, they exhibit specific effects on the different dimensions of interaction orientation. Originality/value The results specifically highlight that interaction orientation counterbalances the negative impact of exploration on performance. Moreover, the findings underline the key role that customer interaction processes and tools play in making exploration and exploitation singularly effective. This is a real issue, as SMEs broadly tend to adopt opportunistic tools, not necessarily as part of a clearly defined strategic focus.