Balancing Exploration and Exploitation

New research offers insights into factors that can affect the decision-making process.

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What strategies can improve decision making?

Scholars have argued that companies can develop greater ambidexterity as they search for better ways to balance practices supporting optimal “exploitation” of existing opportunities and those promoting “exploration” of new ones.

Although much of the research on corporate ambidexterity has been focused on how companies can best achieve ambidexterity, less attention has been paid to how the cognitive processes of individual managers can shape performance on a broader level.

New research by Daniella Laureiro-Martínez, Stefano Brusoni, Nicola Canessa and Maurizio Zollo shifts the discussion. In an article published in Strategic Management Journal, the authors describe how different regions of the brain control different cognitive activities. (See their article “Understanding the Exploration-Exploitation Dilemma: An MRI Study of Attention Control and Decision-Making Performance.”)

Exploitation, the authors explain, is behavior that optimizes performance in current tasks, and exploration is behavior leading to disengagement from current tasks to search for alternatives. Exploitative decisions take place in areas of the brain associated with reward seeking and involve learning by doing. Exploration choices, by contrast, activate the brain’s attention control and executive functioning regions, which are tasked with managing new situations.

The researchers studied the decision-making behaviors of 63 people who had at least four years of experience making managerial decisions. Participants were asked to sit at computers and play a game, the purpose of which was to accumulate points that could be traded for cash. Following a brief warm-up, they played the game while lying inside a functional MRI scanner that took images of their brains. The game featured four slot machines that awarded points according to rules that changed from trial to trial; each participant played a total of 300 trials.

However, the changing rules were never spelled out; participants were expected to learn about them through experimentation. Participants could choose to pursue an option they were familiar with (exploitation) or explore a new one (exploration).

The researchers compared the choices of study participants (the number of exploration and exploitation choices, and the number of times they switched between the two) and their decision-making performance.

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