Macquarie Business School, Macquarie U., Australia
Strategy by doing in the form of experimentation can help firms form innovation strategies in uncertain environments. Although we have gained valuable insights into the benefits of using experimentation to form strategies in start-ups, little is known about how experimentation should be supported by firm resources and the firm’s operational environment in affecting innovation outcomes in established firms. Understanding these configurations is crucial for firms to optimize resource allocations and foster continuous learning to drive successful innovation. Accordingly, this study applies a configurational approach to uncover the alignment of experimentation and firm resources and their impact on innovation performance in SMEs. Our findings indicate that high innovation performance can be achieved by experimentation complemented by either internal firm knowledge to shape the environment or by external firm knowledge to adapt to the environment, particularly under conditions of high environmental uncertainty. However, under low environmental uncertainty, experimentation is not always required to achieve high innovation performance as firm resources can compensate for the lag in learning. This study extends the strategy by doing literature by providing nuanced insights into how firms can strategically leverage experimentation based on their resource constraints and operating environment.
