19: Carnegie Mellon Series #2 – Exploration and Exploitation of Knowledge

James March

In this episode, we read the widely cited article, “Exploration and Exploitation in Organizational Learning,” published in 1991 in the journal Organization Science. In the paper, March considered the relationships between exploration of new ways of doing things and the exploitation of accepted, standard practices for organizational learning.

James G. March is Professor Emeritus at Stanford University in management, sociology, political science, and education at Stanford University. He has been on the faculty since 1970. He is known for his contributions to organization and management theory. Together with his “Carnegie School” colleagues Richard Cyert and Herbert A. Simon, March developed a theory of the firm that incorporated aspects of sociology, psychology, and economics as an alternative to neoclassical theories. The focus of the research was on organizational behavior and the application of decision analysis, management science, and psychology in addition to theories such as bounded rationality to the understanding of organizations.

March created two basic models of organizational learning in order to consider the challenges managers face while allotting resources between exploration and exploitation: distribution of costs and benefits across time and space, and the effects of ecological interaction among members of the organization. The first model examines the case of mutual learning between members of an organization and an organizational code (also known as organizational memory) within a particular organization. The second case examined learning and competitive advantage in competition among firms for primacy. As noted in the abstract, “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.”

March attempted to show that learning in organizations is still possible even in the presence of causal ambiguity. While the paper has been criticized for its very simplistic model of organizational learning and lack of empirical data, a strong point of the paper may be the general insight in provides about collective learning under ambiguous conditions.

What are the tradeoffs and challenges associated with balancing exploitation and exploration? What does it mean for organizational learning? Read the paper and listen to your intrepid podcasters, as we grapple with March’s ideas.

You may also download the audio files here:  Part 1 | Part 2 | Part 3

Read with us:

March, J. (1991). Exploration and Exploitation in Organizational LearningOrganization Science, 2(1), pp. 71-87

To Learn More:

Levitt, B. and J. G. March. (1988). Organizational learning. Annual Review of Sociology, 14: 319-340

Gupta, A.K., Smith, K.G. and Shalley, C.E., (2006). The interplay between exploration and exploitation. Academy of Management Journal, 49(4), 693-706.