Differentiating between Exploitative and Explorative Innovation Efficiency

Innovation efficiency represents a fundamental competitive edge for companies, but bases on exploitative as well as explorative innovation activities which require different structures and approaches. This study breaks down innovation efficiency into exploitative and explorative innovation activities and explores influencing factors such as price and quality competition. Data Envelopment Analysis is applied to determine the innovation efficiency scores, and ordinary linear, as well as Tobit regressions, are used to uncover different modes of operation of exploitative and explorative innovation activities: While turnover growth stimulates exploitative innovation efficiency positively, product and quality competition in two of four models positively affects explorative innovation efficiency. This points towards different underlying motivations, indicating that exploitative innovation efficiency can be related to “quick wins” whereas explorative innovation efficiency improves trough outside pressure of product- and quality competition.