Exploration and Exploitation in Organizational Learning

Exploration and Exploitation in Organizational Learning

Summary for agile leaders

Seminal simulation paper that helps us understand how organizations adapt decision-making according to what they currently know. It simulates adaptation by modelling how knowledge moves into and around an organization, regardless of whether that knowledge is correct or not. March's simulation showed the value of a mix of slow and fast learners in an organization (innovation emerges slowly and as a result of variation).

The problem that organizations must learn to understand and decide upon, is how to allocate scarce resources between two core activities; explorative and exploitative. This decision impacts competitive performance and long-term viability.

Reviewed: 31 Dec 2022 by Russ Lewis
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James G. March
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This paper considers the relation between the exploration of new possibilities and the exploitation of old certainties in organizational learning. It examines some complications in allocating resources between the two, particularly those introduced by the distribution of costs and benefits across time and space, and the effects of ecological interaction. Two general situations involving the development and use of knowledge in organizations are modeled. The first is the case of mutual learning between members of an organization and an organizational code. The second is the case of learning and competitive advantage in competition for primacy. The paper develops an argument that adaptive processes, by refining exploitation more rapidly than exploration, are likely to become effective in the short run but self-destructive in the long run. The possibility that certain common organizational practices ameliorate that tendency is assessed.

Cite as (Harvard referencing)

March, J.G., 1991. Exploration and Exploitation in Organizational Learning. Organization Science 2, 71–87

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