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The impact of COVID-19 on SMEs’ ambidextrous learning:
A multiple case-study in China
MSc Thesis Supply Chain Management
University of Groningen, Faculty of Economics and Businesses
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Abstract
Purpose:This research aims to explore the impact of COVID-19 on ambidextrous learning of SMEs, and how the participating SMEs maintain ambidextrous including internal exploitation and external exploration. Moreover, the way of SMEs react in different stages of COVID-19 with organisational innovation climate is also analysed.
Method/Design: A multi-case study was conducted consisting of 10 SMEs from China in the
technology industry. Data was analysed through deductive coding.
Findings: COVID-19 has brought many uncertainties and pressure to the ambidextrous learning
of SMEs regarding resource, leadership and knowledge aspects. However, SMEs are taking initiatives and creating organisational innovation climates to mitigate the negative impact of COVID-19. The result of ambidextrous learning and innovative performance turns out to be positive for the participating SMEs.
Originality/value: This is one of the few studies that analyses the relationship between
ambidextrous learning and organisational climate in SMEs. It also provides insights on the impact of COVID-19 crisis on ambidextrous learning with a case study.
Keywords: Ambidextrous learning, COVID-19 crisis, Innovation, SMEs, Organisational
climate
Acknowledgements
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Table of content
Abstract ... 2 Acknowledgements ... 2 1.Introduction ... 4 2.Theoretical Background ... 72.1 Ambidextrous learning and SMEs ... 7
2.2 Organisational crisis and ambidextrous learning ... 9
3. Methodology ... 12 3.1 Research design ... 12 3.2 Research setting ... 12 3.3 Data collection ... 13 3.4 Data analysis ... 15 4. Results ... 17
4.1 Ambidextrous learning on participating SMEs during COVID-19 ... 17
4.2 Ambidextrous learning and innovation climate ... 20
4.3 Cross-category analysis between category CM and category IM ... 26
5. Discussion and conclusion ... 28
5.1 Managerial implications ... 29
5.2 Limitations and further research ... 29
References ... 31
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1. Introduction
Enterprises face numerous challenges to survive in this changing world. New situations are often accompanied by utilisation of advanced knowledge and policies (Curado, 2006).Some of the companies incline to strengthen the organisational capability of learning internally (Chiva, Alegre, & Lapiedra, 2007). One way of learning relates to knowledge creation through continuous process improvement (Wang & Ahmed, 2003). However, a rapidly developing business world requires more than creating and optimising knowledge within an internal loop. Instead, variety and response diversity input ensure survival under new conditions (Alcalde-Heras, Iturrioz-Landart, & Aragon-Amonarriz, 2019). To sustain their competitive advantage in the market, organisations aim at exploitation its potential for success (Coccia, 2017). In the meanwhile, organisations also need to perform exploration to keep in pace with their competitors and the market (Alcalde-Heras et al., 2019).
The ability to simultaneously achieve internal exploitation and external exploration refer to ambidextrous learning (Gibson & Birkinshaw, 2004). Ambidextrous learning is an important activity for organisational innovation and success (O’Reilly & Tushman, 2013). While exploitation is more related to institutionalised practices in a short-term, exploration is considered as innovating existing practices for the long run (Majoor, 2015). In order to achieve the ambidextrous requirements, organisations need to pursue objectives in both short-term and long-term (Zuraik & Kelly, 2019). Some researches encourage ambidextrous organisations to perform exploitation and exploration simultaneously to maintain competencies (Raisch, Birkinshaw, Probst, & Tushman, 2009). However, perform ambidextrous learning is challenging for companies (O’Reilly & Tushman, 2008).
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As the development of this field, studies also reveal that ambidexterity-performance relationship varies under different environmental conditions (Junni, Sarala, Taras, & Tarba, 2013). For example, some researchers analysed the alignment between ambidextrous learning and the context (Gibson & Birkinshaw, 2004). Gibson & Birkinshaw also noticed that different industries may have their own paths when aligning ambidextrous learning with the context. For instance, automotive companies tend to gradually optimise the alignment, whereas gas companies focus more on the adaptability of ambidextrous learning before reaching to alignment. Thus, the alignment between ambidextrous learning and the context varies under different business environment. Jansen, Simsek, & Cao (2012) concluded that certain features of the environment would affect the effectiveness of ambidextrous learning. Organisations with centralised and independent resource attribute significantly influence the ambidexterity-performance relationship. However, the authors collected their data in one large financial company. Firms in a more dynamic industry might lead to more pronounced conclusions.
However, there are still many types of circumstances in which the effect of ambidextrous learning on organisation performance remains inconclusive (Solís-Molina, Hernández-Espallardo, & Rodríguez-Orejuela, 2018). One of these circumstances is the unique contextual and strategic uncertainty relating to a crisis (Archibugi, Filippetti, & Frenz, 2013). Crises usually bring a high level of stress and uncertainty to the business environment (Iborra, Safón, & Dolz, 2019). This uncertainty will hinder the innovative activities of many firms, especially younger and smaller ones, to stop ongoing projects due to extra input (Paunov, 2012). Up to 9% of small and medium-sized enterprises (SMEs) in Europe have to abandon their business per year due to crises, while a mass of others stay in the recovery process (Iborra et al., 2019). Unlike large companies, the performance of SMEs regarding innovation and ambidextrous learning remains underexplored (Alcalde-Heras et al., 2019). It might be inappropriate to simply imitate ambidextrous strategy from large enterprises as SMEs have different operating conditions and characteristics (Chang & Hughes, 2012). The mechanism of how SMEs reacts and resist crises from the viewpoint of ambidextrous learning requires further exploration.
This brings to the following research question:
How do SMEs maintain ambidextrous learning during a crisis?
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that SMEs can overcome barriers through collaboration and resources leverage as drivers. This finding will be further analysed under a crisis setup in this research. In line with Zuraik & Kelly (2019) and Diesel & Scheepers (2019), this research is intended to confirm the potential and effect of innovation climate in a crisis. A multi-case study was conducted to reveal the way of SMEs maintains ambidextrous learning under the impact of crises. Data was collected from Chinese SMEs via online interviews.
This study makes contributions in both intellectual and practical perspectives. Firstly, it will bring new insights into the research field of ambidextrous learning on SMEs. Crises create unique uncertainty to the contextual conditions. This research will add to the existing knowledge of applying ambidextrous learning under a crisis condition. Secondly, this research focuses on the way of crises affect ambidextrous learning on SMEs with a case study. In the meanwhile, most of the scholars apply surveys to quantify the ambidexterity-performance relationship at this stage. Thus, this research will bring diversity to the methodology of ambidextrous learning. Different research methods have particular depth and lens when analysing similar research questions. Thirdly, this research is combining external uncertainty with ambidextrous strategies. The findings of this study will assist decision-makers in adapting ambidexterity during a crisis on a practical level. Since managerial support is critical when facilitating ambidextrous learning in practice (Zimmermann, Raisch, & Cardinal, 2018).
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2. Theoretical Background
This section will introduce the key concepts that relate to ambidextrous learning, SMEs and organisational crisis. In the first part, the interaction between exploration and exploitation, some limitations regarding ambidextrous learning and how they are mitigated within SMEs is also introduced. The second part relates to the impact of organisational crises on ambidextrous learning and SME characteristics.
2.1 Ambidextrous learning and SMEs
Exploiting old certainties while exploring new possibilities is fundamental for organisation success in the long-term (March, 1991). According to March, exploitation refers to efficiency, productivity, control while exploration stands for innovation, discovery and variation. An organisation should allocate sufficient resources for both activities to achieve current and future viability. Cao, Gedajlovic & Zhang (2009) indicated that the pursuit of exploration and exploitation simultaneously is an essential goal for companies. O’Reilly & Tushman (2013) described exploitation as organisations’ comfort zone and exploration as the journey outside. Organisations are satisfied while improving the stuff they are familiar with and have active responses in time. Taking a tour outside of the comfort zone for new possibilities is also substantial. O’Reilly & Tushman also suggested that companies should perform both tasks to avoid being irrelevant to the market.
Achieving exploration and exploitation simultaneously, also known as ambidextrous learning is crucial to organisational innovation (O’Reilly & Tushman, 2013). Ambidextrous learning is defined as the ability to be simultaneously efficient in exploitation for business demands and exploration to adapt to environment changes (Iborra et al., 2019). Ambidextrous learning is an effective method to pursue the innovation goals of a company (Solís-Molina et al., 2018). Applying ambidexterity has attracted more attention to innovation within the company (Rasch, Birkinshaw, Probst, & Tushman, 2009). An increased number of firms also tend to have a separate exploration and exploitation unit under the organisational innovation discipline (Blindenbach-Driessen & Van Den Ende, 2014). Thus, applying ambidexterity helps companies to further generate and implement the idea of innovation into operation (Rosing & Zacher, 2017).
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more knowledge to perform ambidextrous learning. Voss & Voss (2013) argues that large companies tend to benefit more from an ambidextrous learning strategy than younger ones. As larger companies are more likely in developing and sustaining ambidextrous learning ability in the long-term. Thus, firm size has an impact on the innovation performance of a company. Although ambidextrous learning has been profusely studied in large companies, the ambidexterity-performance relationship for SME remains underexplored (Alcalde-Heras et al., 2019). Generalising the ambidextrous strategy of large companies to SMEs could prove incorrect or even dangerous (Chang & Hughes, 2012). Thus, it is vital to focus on the conditions and characteristics of SMEs regarding ambidextrous learning.
2.1.1 Organisational environment and innovation climate
Ambidextrous leaning can also be challenging for companies. One of the main barriers is the simultaneous growth of exploration and exploitation. Earlier studies emphasise the trade-offs between exploration and exploitation due to resource allocation dilemmas (Raisch et al., 2009). Contradicting goals with coinstantaneous expenses hinder the coexistence of exploration and exploitation. Besides, exploitation strategies focus on the business performance in a short-term while exploration strategies tend to find new opportunities in long run (Zuraik & Kelly, 2019). Different focuses have also brought pressure on the decision-making process for ambidextrous learning. Furthermore, a common bias lies in the preference of exploitation as it created a greater short-term return (Junni et al., 2013). While some companies believe that exploration can facilitate organisation innovation and evolve with the market (Zuraik & Kelly, 2019). The contradicting preference can lead to unbalanced growth of exploration and exploitation, which tends to be a self-destructive action for the future. Consequently, balancing exploration and exploitation simultaneously is one of the intractable concerns when applying ambidextrous learning.
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organisational culture might be a preferable choice when it comes to ambidextrous learning.
Scholars also pointed out the opportunity of organisational innovation climate as an influencer for organisational ambidextrous learning in SMEs in studies. Organisational innovation climate is positively and significantly related to the innovation success in SMEs (Dabić, Lažnjak, Smallbone, & Švarc, 2019). A supportive organisational climate for innovation can it stimulates the attentions for exploration and exploitation in the meanwhile (Martins & Terblanche, 2003). Organisational innovation climate encourages internal development while accepting the failure due to creatively for companies. Thus, employees can express both their creativeness and efficiency in an appropriate organisational innovation climate. Besides, the innovation climate can be easily adjusted under the influence of leadership and innovation competency (Zuraik & Kelly, 2019). The adaptiveness bring by the organisational climate will then be able to promote SMEs’ ambidextrous learning under different circumstances. With appropriate practices and further study, organisational innovation climate can encourage ambidextrous learning for SMEs shortly (Diesel & Scheepers, 2019)
2.2 Organisational crisis and ambidextrous learning
An organisational crisis refers to an unstable and potentially disruptive event that threatens an organisation’s goals while sabotaging relationships with its stakeholders (Bundy, Pfarrer, Short, & Coombs, 2017). Crises can create unique industrial uncertainty, which leads to unstable external condition and harsh competition (Alcalde-Heras et al., 2019). Besides unexpected contexts, firms also face increased internal demands during a crisis (Iborra et al., 2019). Companies will face challenges as structural change or management requirements. Both internal and external factors may provoke distinct influence on innovation performance during a crisis (Lohrke, Bedeian, & Palmer, 2004). Thus, applying ambidextrous learning is even more difficult during a crisis.
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able to strategically allocate resources among ambidextrous activities with faster responses (O’Reilly & Tushman, 2013). Quick response in ambidextrous decision-making allows SMEs to reduce environmental uncertainty while looking for new market opportunities during crises.
Some other researchers are not optimistic about the innovation performance of SMEs in a crisis. The challenges of a crisis vary under different external circumstances, such as fluctuating market conditions or an economic recession (Alcalde-Heras et al., 2019). SMEs tend to vacillate between different innovative strategies under these circumstances, which brings negative impact to their survival. The market downturn can also create new environmental conditions, which makes applying ambidextrous learning even more complicated (Iborra et al., 2019). Not to mention the negative impact of resources and leadership limitations for SMEs on ambidextrous learning. To conclude, the innovation performance of SMEs is relatively unpredictable during a crisis. Thus, the impact of crises on SMEs’ ambidextrous learning requires further attention and exploration.
2.2.1 Limitations in archiving ambidextrous learning during crises
There are also some SMEs’ characteristics that further hinder the balance of exploration and exploitation in ambidextrous learning during crises. One of the particular obstacles that SMEs are facing is resource constraints (Raisch et al., 2009). Resources are considered as a prerequisite driver when applying ambidexterity in a company (Senaratne & Wang, 2018). Due to resource constraints, smaller companies may not balance exploitation and exploration simultaneously as larger companies (Alcalde-Heras et al., 2019). Crises will limit SMEs’ access to resources. Limited resources will also bring pressure on strategic and operational actions for SMEs (van de Vrande, de Jong, Vanhaverbeke, & de Rochemont, 2009). One of the most important resources that accelerate ambidextrous learning is human resource. The performance of innovation also varies under an individual level of ambidextrous learning (Zuraik & Kelly, 2019). The innovative comprehensive of an individual helps to manage the interplay of exploration and exploitation in practice. However, SMEs are usually less attractive for talented employees than larger companies (Tobiassen & Pettersen, 2018). Crises will also cause human resource loss such as decruitment. Hence, resource constraint is highlighted as a limitation for SMEs to perform ambidextrous earning during crises.
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3. Methodology
3.1 Research designThis study aims to reveal the impact of SMEs' response to crisis on ambidextrous learning. Firstly, this research focused on the process of SMEs initiative to mitigate the negative impact, or enhance the positive impact of crises on ambidextrous learning on SMEs. The majority of studies focus on quantifying the performance of ambidextrous learning, which is different from the aim and research question of this study. Secondly, a multiple case study was used to reduce observer bias and misjudging toward a single event (Karlsson, 2016). The contextual uncertainty that a crisis can bring remains obscure. The level of a crisis may also vary under the different perception of crises. A case study fits the research aim since this method tend to explore more information (Flick, 2018). Thus, multiple case study was chosen to eliminate the potential ambiguity from interviewers and interviewees (Yin, 2009).
3.2 Research setting
This research was conducted under the impact of COVID‑19 crisis. COVID‑19 is a wide-spread pandemic identified in Hubei, China 2019. According to the WHO Weekly Epidemiological Update, over 27 million cases and 900, 000 deaths were confirmed up to 6 September (WHO, 2020). The wide-spreading disease is not only damaging to human health but also causing economic fluctuations within the whole world. Taking the Netherlands for example, Statistics Netherlands (CBS) estimates that the gross domestic product (GDP) will fall by 8.5% in the second quarter of 2020 compared to the previous quarter. Up to 17 August, more than 2320 Dutch companies or institutions declared bankrupt with an average of 74 bankruptcies weekly in the second quarter of 2020 (CBS, 2020). Dutch National Institute for Public Health and the Environment announced that the diagnosed cases of COVID-19 are still increasing compare to that of last week up to 8 August (RIVM, 2020).
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This research focused on technology-oriented SMEs for data collection. Innovation is essential for high-tech enterprises when confronted with more globalised competitions (Wu, Ye, Ding, Lu, & Euwema, 2018). Thus, technology-oriented SMEs were chosen as the participants to fit the research aim of this study. Tech companies that perform both exploration and exploitation on an innovation purpose were taken into consideration in the first place. To determine this beforehand, the author always had a brief email conversation with the interviewee and went through the develop and innovate ideas of the company at the beginning. Then a sample questionnaire derived from Zuraik & Kelly (2019) regarding ambidextrous learning was sent to each SME before the interview. In the first-round of interviews, the author only interviewed SMEs that were able and willing to answer the questionnaire. After summarising the key concepts and findings from the first-round, and reflection in light of existing insights, the author had a second-round interview to ask detailed questions with the upgraded interview protocol. Several third-round interviews were also conducted with a few participants when the answer they provided was not sufficient or clear compare to that of other participating SMEs in the second-round.
The SMEs included in this study were divided into two categories: Chinese SMEs that focus on the Chinese market, labelled category CM; and Chinese SMEs that focus on the International market, labelled category IM. China was the first country to be confronted with the virus. The crisis situation was under control now and therefore less severe compared to other parts of the world (Tian et al., 2020). Thus, the organisational innovation climate of Chinese companies in category CM were expected to be different from that of category IM, as a response to the external impact of COVID-19. Companies in category CM were facing a more stable business environment, thus the organisational innovation climate were expected to be more gentle and encouraging when applying ambidextrous learning. Thus, the difference between the two categories also brought additional insights into the influence of COVID-19 on organisational ambidextrous leaning for SMEs.
3.3 Data collection
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in dedication to both exploration and exploitation were selected. After a preliminary selection, companies were approached through phone or e-mail with several example questions. The author thoroughly explained the research aims to the interviewees over the email. Then a brief questionnaire was sent to the selected companies before the formal interview started.
The main concepts of the interview were based on the literature background. Open-ended questions were asked to obtain more detail from the interviewee. If the interviewee fails to provide satisfying answers to one specific question, the pertinent semi-structured question was asked as a follow-up question. Each question was designed for further information towards the impact of crisis and SMEs ambidextrous learning. Table 3.1 shows the interview list that took place as the research proceeds. The transcript of the interview remains anonymous and was sent back to the interviewee for approval. The interview protocol used in this study can be found in Appendix A.
TABLE 3.1
The interview lists
15 Interviewee F2 IM Manager 52.49 35:36 Interviewee G G, manufacturing company Director 61.30 26:14 Interviewee H H, software company Project Manager 58:32 25:53 Interviewee I I, software company Project Manager 56:38 26:59 15:47 Interviewee J J, manufacturing company R&D Director 58.62 29:18 3.4 Data analysis
Interviews that were conducted in other languages were translated into English in Word files. Transcripts of interviews were coded with Atlas.ti software. The author firstly summarised the original transcript and skipped the irrelevant conversations. The summaries could provide an overview of the aspects that relate to ambidextrous learning in SMEs before and after the crisis took place. Then, quotes from interviewee were labelled as the first-order coding. Chunks of information are direct quotes that closely relates to the research topic from the interview transcripts (Corley & Gioia, 2004). The second-order codes were clusters that assign chunks with similar meaning and labels. These clusters related to COVID-19 impacts, ambidextrous learning and the responding organisational innovative climate. Cross-category comparisons between category IM and CM were conducted among relevant concepts in a inductive way (Miles & Huberman, 1994). The codes were refined phrases within a code book, appear through a few cycles. Table 3.2 below presents the excerpt coding tree of this research.
TABLE 3.2
Coding tree of ambidextrous leaning during COVID-19
1st order code 2nd order code 3rd order code dimension ‘The procurement time of some imported
materials has been extended’- Interviewee F1
Barriers to material Resource constraints
Resource
‘We use to hire professors from universities but now it cannot be done’ - Interviewee B
Barriers to human resource ‘One of the most important changes is that we
separate the whole projects into modules’-
Modularisation of the products
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‘The rapid change of the market has put great pressure on our management strategies.’ - Interviewee I New management uncertainties Leadership constraints Leadership
‘This is quite a new experience for me so I need to think carefully when supporting the team members’ - Interviewee G
Limited TMT guidance
‘Students that are interested in what we are doing will usually get a chance to work for us’ - Interviewee B
Simplify the hiring processes
Decision-making
‘Online forums and social media bring us a lot of new information’ - Interviewee G
External knowledge sharing
Comunication Knowledge
‘The technologies we have is our biggest competitiveness. We never want to lose that’ - Interviewee J
Risk of confidential
leakage
Legitimacy
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4. Results
This section will introduce the impact of COVID-19 on ambidextrous learning and how SMEs dealt with them. Firstly, the impact of different stages of COVID-19 will be introduced, followed by the initiative practices the participating SMEs take to mitigate the negative impact on ambidextrous learning using an appropriate organisational innovation climate. Last but not least, a cross-category analysis between category CM and category IM will be presented.
4.1 Ambidextrous learning on participating SMEs during COVID-19
Similar to other crisis, the impact of COVD-19 on the participating SMEs were divided into three stages: pre-crisis, crisis response and post-crisis. Most of the respondents focused on the crisis response and post-crisis stage during the interview, which was more specifically described as during and after the harsh lockdown as for COVID-19. The findings regarding ambidextrous learning for the participating Chinese SMEs were also divided into two phases. Table 4.1 shows some of the key practices during and after the harsh lockdown for the respondents. The type of technology SMEs are also attached behind each respondent. Software Co. represents software companies, Manufacturing Co. represents manufacturing companies while Intel-manufacturing represents intelligent manufacturing companies.
TABLE 4.1
Key practices during and after the harsh lockdown for the respondents Practices during the harsh lockdown Practices after the harsh lockdown
Lockout – Interviewee G Promote innovation projects– Interviewee
A1
Self-quarantine – Interviewee D Make full use of resources – Interviewee I Build development team – Interviewee G Ensure communication – Interviewee B Source: The interview data of this study
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crisis. Thus, the data during the harsh lockdown were not considered in the following part of the analysis. Besides, taking the lockdown stage which is relatively unique during COVID-19 would make the results of this study not be applicable to other crisis situations then.
Ever since the end of the harsh lockdown, the respondents described their attempt to catch up with the pace in the business market. Almost all the respondents noticed the rapid changes in the market and customer needs. Interview A1 (Software Co.): ‘The market has really changed […] my company and our competitors have all adopted countermeasures to reach to innovation under new environment’. According to interviewee I (Software Co.): ‘Our customers now want products that really fits with their new digital requirements, such as remote control, so we need to develop something new’. The crisis brought many uncertainties as well as opportunities to the market. The participating SMEs also expressed their urge to developing suitable ambidextrous strategies to adapt to the changes brought by the crisis.
Data exhibited the main concerns of the respondents on the ambidextrous learning under three aspects: resource, knowledge and leadership. First of all, most of the respondents felt the boost of new information and knowledge within the industry. According to interviewee H (Software Co.): ‘This is like a revolution in the industry […] now we have something new to learn and dig into if we still want to apply ambidextrous learning’. There were also changes in resources due to the crisis. Interviewee E (Software Co.): ‘We need to redeploy people due to the postponement of innovation tasks’. Leadership also drew much attention for more than half of the participants. Interviewee G (Manufacturing Co.): ‘I try to have an ambidextrous mind after the breakout, and I set myself as an example for other group members to follow’. Thus, the respondents were taking measures to modify the practices mainly under these three aspects when performing ambidextrous learning.
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Relevant aspects after the harsh lockdown for the respondents
Source: The interview data of this study
To provide more information, table 4.2 shows the ambidextrous focuses and background information of each SME. The number of ‘’ represented the degree of emphasis in each case. The more ‘’ assigned, the higher extent did the respondent consider the aspect important. For instance, interview A1 (Software Co.) emphasised that: ‘Exploitation is important to us and we also allocate resources to it, but long-term success and the ability to evolve with the market is what we are looking for. We always take exploration at a higher focus’. Thus, company A gained one extra checkmark that indicates it was more exploration-focused compare to other companies treated exploration and exploitation equally. The rest of the assessment was also done in the same manner.
TABLE 4.2
Ambidextrous focus and background information per case
Category Case Number Established Business Exploration Exploitation
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of workers time mode focused focused
CM A 15 2019 B2C B 18 2019 B2B C 50 2012 B2C D 35 2013 B2C E 22 2016 B2C IM F 80 2014 B2B G 100 2012 B2C H 65 2009 B2C I 90 2010 B2B J 67 2010 B2B
Source: The interview data of this study
4.2 Ambidextrous learning and innovation climate
The respondents were taken initiatives to confront with the impact of COVID-19 regarding resource, leadership and knowledge as essential preconditions to perform ambidextrous learning. The crisis brought mainly uncertainties as for the market and customer demand to the participating SMEs. However, these SMEs were taking initiatives to mitigate the negative impacts, which was similar as creating an innovation climate in the organisation. Findings on how the participating SMEs created organisational innovation climate regarding resource, leadership and knowledge were presented and analysed in the following section.
Resources
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ambidextrous learning during a crisis.
In the aspect of the material, most of the respondents mentioned the lack of research and development funding during a crisis. For example, interviewee C (Intel-manufacturing) mentioned: ‘The development requires both internal and external resources, we really need the financial support’. Interviewee I (Software Co.): ‘We need to take a long look at the investment requirement, and be cautious when making final decisions’. The money they already invested on the equipment could not be refunded during the crisis, which is also a material barrier for their further ambidextrous development. The previous loss during the harsh lockdown forced the respondents to allocate material resources more wisely. The lack of funding promoted the innovation climate of digitalisation for some of the respondents. One of the methods is to seek for the software that can perform the tasks. Interviewee H (Software Co.): ‘We do not need to pay for the equipment anymore, this saves a lot of money for us’. According to Interviewee H, the software brought their customers the same experiences as the physical equipment. As a software company, they are intended to increase the proportion of software in their business and the digitalisation climate certainly accelerates the process. Interviewee B (Intel-manufacturing) also agreed that: ‘The software we developed provide our customers with excellent user experience as before, but the investment is only one-third […] we have more to spent on innovation’. The digitalisation innovation climate helped the participating SMEs to save on investment for the business, thus they had more materials to fulfil the ambidextrous learning needs during COVID-19.
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also facing the situation that their employees could not continue to work. Interviewee B (Intel-manufacturing): ‘Some employees from other provinces chose to quit their jobs due to COVID-19, we had to look for new employees’. The departure of older staff made the project for ambidextrous learning more difficult to carry out. Interviewee I (Software Co.) also mentioned that: ‘We now have fewer human resources to allocate, but the requirements for ambidextrous project development is more urgent’. Ambidextrous learning was significant for these SMEs to mitigate the negative impact of COVID-19 and adapt to the new market.
To accelerate the development of ambidextrous learning, some respondent chose to enhance employee creativeness with an innovation climate. Interviewee G (Manufacturing Co.): ‘We have given much creative space to our employees, even if the innovation project turns out to be a failure, the company will suffer the consequences as long as it is not a human error’. The employees gained decision-making freedom under the encouraging innovation climate. Thus, they tend to be as creative as possible when facing ambidextrous tasks. Interviewee F2 (Manufacturing Co.) also said that: ‘We're now more cautious when choosing the team member […] We also use some incentive methods to stimulate innovation’. Different members can create different working climate among the team. With appropriate group members, the encouraging innovation climate can perform more ambidextrous tasks with less spend. Some SMEs also took the chance to bring in new blood to make up for the lack of expertise. Interview B (Intel-manufacturing): ‘We try to build a close relationship with the universities. Students with sufficient textbook knowledge can now apply what they learn into practices with an internship, especially during this time when jobs are hard to find’. New graduates could bring original perspectives in the early times of establishing organisational climate. Besides, innovation climate that encourages teamwork and communication also helped to perform exploration and exploitation simultaneously for the participating SMEs.
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resource application by creating an innovation climate on all the employees. First the employees were gathered together to develop a fundamentals module, then they would split into different groups and customise the product. The innovation climate created a shared understanding among all the developer, which also accelerated the flexibility for SMEs.
Leadership
As mentioned earlier, market change has been brought up by all the SMEs as one of the key aspects during COVID-19. It is usually difficult for SMEs to identify the uncertainties and type of changes in a dynamic environment (Koh & Simpson, 2005). Most of the respondents pointed out the changes with their collaborating partners and their competitors. The crisis has brought a various degree of impact on other players in the market. For example, interviewee A1 (Software Co.) mentioned: ‘We would like to establish the alliance with our business partners to fight together, but everyone is busy enough with themselves’. Alliances would be a smart move for SMEs to ensure survive, but the unique circumstances brought by COVID-19 might not always be working for them. Interview H (Software Co.): ‘Our competitors are also taking strategies to survive. it takes time to figure out who will perform better’. Changes in the market force all the SMEs to adapt to corresponding business mode with other companies. The market has also become more competitive for the participating SMEs with more opportunists and threats.
To make things worse, most of the respondents had limited experience in dealing with the changes from customers and the market. Some of them expressed their concerns regarding the impact of the crisis. Interviewee J (Software Co.) mentioned: ‘This is a new frontier for me, as the leader of the project I need to digest the situation and then provide guidance to my fellow members regarding ambidextrous learning’. The process of exploration and exploitation for the company is also self-exploration and self-exploitation for the leader themselves. They also made plenty of attempts to explore and exploit the opportunities to ensure innovation and survival for their companies. Market changes also brought new uncertainties to the management. Interviewee G (Manufacturing Co.): ‘Uncertainties have increased, and it takes more time for me to make decisions […] but the market requires swift response’. Without support from the external experts mentioned, the leaders within the interviewees were even more puzzled when applying ambidextrous learning.
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SMEs were promoting an innovation climate that gives power to employees. As most of the respondents played a leading role in the interviewed SMEs, they were fully aware of the importance of leadership when establishing an appropriate innovation climate. Interviewee G mentioned (Manufacturing Co.): ‘I always try to hold myself to s high standard, also as an example to my group members’. As the team leader, they were more aware of the overall situation when performing ambidextrous tasks. Thus, they needed to share their vision with other team members to keep the project going smoothly. And it was also vital to create an organisational climate that could devolve power to the lower levels of the team. Interviewee C (Intel-manufacturing): ‘Project leaders should apply less intervention to the projects […] but we also need to provide risk evaluation and be prepared for the transition of businesses’. Leaders in the ambidextrous project should be fully aware of their scope of liability. They needed to provide the team with advices when facing troubles. And they also needed to provide the team members with freedom to explore new possibilities. Some decision-makers also took advice from a broader perspective. Interviewee D (Manufacturing Co.): ‘We promote the link among all the project groups, it is easier to perform ambidextrous tasks. Interviewee E (Software Co.) also mentioned: ‘Decision-makers usually avoid making major decisions alone, and they usually think twice’. Adopting members' suggestions could help make up for the information of the project, making it more easily for the leaders to perform ambidextrous tasks.
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give our employee more space to creative’. The simplified decision-making processes also added to the adaptability of SMEs when performing ambidextrous tasks under different situations.
Knowledge
As COVID-19 brought rapid changes of the market and customer demand, the participating SMEs also required knowledge acquisition to perform ambidextrous learning under new conditions. Interestingly, all the respondent SMEs mentioned relevant information under knowledge sharing to some extent. For instance, interviewee F1 (Manufacturing Co.): ‘We are more sensitive to new information in the industry after the outbreak, as we really want to keep up with other players’. Interviewee F2 (Manufacturing Co.) added: ‘We pay close attention to the latest development of the industry from online news’. An innovation climate promoted the absorption of up-to-date knowledge for both exploration and exploitation intensions. Without the latest developments and information in the industry, it would be really hard for the respondents to apply ambidextrous learning under the impact of COVID-19. Interviewee E (Software Co.) mentioned: ‘We paid more attention to social media platforms than ever before […] We have chances to stick to the most cutting-edge technologies as most of them are published digitally’. Online forums and social media promotedthe information spread timely. With the innovation climate to absorb new knowledges, the respondent SMEs could keep in pace with the market when reaching for innovation success.
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Surprisingly, several respondents also expressed their legitimate concerns during the interview. As new influencers to the market, they indeed cherished the patent files and the ambidextrous ability they have. For example, interviewee F1, F2 (Software Co.) and J (Software Co.) have introduced that they avoided external assistance due to their legitimacy concerns. Interviewee B (Intel-manufacturing) also mentioned that: ‘We have to outsource some non-core businesses such as sales. […] We have confidential leakage concerns especially during the COVID-19 period’. This ambivalence was reasonable, as the participating SMEs usually had to make trade-offs between outsourcing and keep their competitiveness. This phenomenon became more common during the crisis, and it brought pressure especially on exploration. To put away these worries, the respondents were trying protect the core business when cooperated with trust-worthy companies. This helps to maintain the exploration ability to perform ambidextrous learning in the participating SMEs.
4.3 Cross-category analysis between category CM and category IM
Interestingly, the findings in cross-category went beyond expectation. It is remarkable that the main differences between category CM and category IM lied in the level of governable resources and the market competition. Average resource satisfaction grade for both categories is shown in figure 4.2. Respondents from category IM provided a higher score on resource satisfaction than category CM. This is due to the fact that category IM has additional opportunities to serve customers in a border market. Multinational companies usually benefit from the significant cost reduction in a larger scale of economies (Schuiling & Kapferer, 2004). The scale of economies enabled better exploitation performance for category IM, then they had additional resources to invest on innovation. Thus, the respondents in category IM had crested a more confident innovation climate in resource allocation for ambidextrous learning.
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under higher environmental uncertainty. For instance, the market abroad might have regulations to protect local enterprises after the breakout. Thus, respondents in category IM were usually more cautious about investment in ambidextrous learning under COVID-19. The innovation climate for category IM were tended to be more intense when applying ambidextrous learning. The average score of resource satisfaction then grew lower for category IM due to a crisis.
FIGURE 4.2
Average resource satisfaction grade
Source: The interview data of this study
All the respondents in category IM had more or less mentioned the intense competition with their competitors. As multinationals were usually more sensitive to the market changes (Blomström, Kokko, & Zejan, 1994), respondents in category IM keenly perceived the decreased requirements in foreign markets. To protect the local economy, authorities are usually selective in letting foreign competitors into the market (Kuznetsov, 2016). SMEs in category IM had to confront the strong competition with local players of international markets. Severe market competitions upset the investment plan on ambidextrous learning, thus negatively impacted organisational innovation performance. Thus, some of the respondents in category IM turned to focus on the Chinese market to maintain ambidextrous during the crisis breakout.
7.3
8.2
7.7 7.5
6.8 7 7.2 7.4 7.6 7.8 8 8.2 8.4
During the breakout Before the breakout
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5. Discussion and conclusion
The findings reveal how the respondent SMEs experienced the crisis, the post-crisis recovery, adjustments to apply ambidextrous learning under crisis conditions. In line with Paunov (2012), the findings of this study also confirm that post-crisis recovery is essential for the long-term innovation of companies. Crises will bring many uncertainties and pressure on ambidextrous learning during a crisis. To battle the negative impact of crises, SMEs may need to put in more effort to meet the underlying requirement such as stronger leadership. In line with the viewpoint of Senaratne & Wang (2018)., this research also reveals the resource and leadership constraint for SMEs as characteristics. To manage ambidextrous learning more effectively, organisational innovation climate can be applied by SMEs. In line with Zuraik & Kelly (2019) and Diesel & Scheepers (2019), this research further presents the potential of innovation climate in a crisis. As organisational climate can adjust shortly, ambidextrous learning also becomes more flexible (Alcalde-Heras et al., 2019). Moreover, the difference between the interview data of category CM and category IM also proved the viewpoint above. However, legitimacy is a new territory that appears during the data analysis and not in previous consideration. Surprisingly, 6 respondents give a positive answer while 4 said almost no effected that COVID-19 had brought them. In general, the COVID-19 crisis brought a positive impact on the participating SMEs regarding ambidextrous learning and innovation performance. This is due to these SMEs have added much confidence into their innovation climate, they have also taken initiatives to seize the opportunity for future success.
To conclude, the post-crisis ambidextrous learning recovery process of the participating Chinese SMEs is that they will face uncertainties and pressure at the beginning. As they gradually understand the situation, these SMEs will take initiative to mitigate the impact of crises. One of the most effective methods is to create a appreciate organisational innovation climate to maintain the underlying requirement for performing exploration and exploitation simultaneously. There's a high probability for these requirements to relate to resource, leadership and knowledge. Table 5.1 shows the impact of the crisis under these three aspects and the corresponding innovation climate along with the initiative actions of this study.
TABLE 5.1
Innovation climate and initiative actions under the crisis
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Resources
Material barrier Digitalisation
Flexibility and Adaptability; Communication Employee barrier Creativeness
Leadership Uncertainty Devolution
Knowledge New knowledge sharing
Absorption Cooperation
Source: The interview data of this study
5.1 Managerial implications
Besides the theoretical contributions, this article also provides decision-making advice on COVID-19 management. In line with Zimmermann, Raisch, & Cardinal (2018), this article emphasises the role of top management when handling ambidextrous learning in a crisis. It is essential for leaders to understand the situation and then provide support and guidance to the rest of the team. If the leadership fails to define the threats to ambidextrous learning during a crisis, the situation will be worse for the employees. Taking initiative is also considered an important practice during a crisis. Archiving ambidextrous learning can already be challenging for SMEs. A crisis situation will make things more complicated. Thus, SMEs should seize the opportunity to ensure the development of ambidextrous learning. For instance, recruitment and taking part in innovation competitions.
5.2 Limitations and further research
Despite the insights from both theoretical and practical perspective, this research consists of limitations. First of all, due to time and effort constraints, only 13 respondents from 10 companies attended the interview. Although the findings between the SMEs within the same category were similar to each other, 10 are still a relatively small number of cases to generalise the findings to other SMEs.
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Appendix A. Interview protocol
1. Introduction
The goal of this interview is to reveal the changes of a certain SME during COVID-19 regarding ambidexterity (explorations and exploitations) activities and innovation performance. The interviewee will be aware of this goal before the interview starts
• Ask for permission to sign the research consent form
• Provide a brief introduction of the research to the interviewee • Ask for permission to record the interviews.
• Inform the interviewees that the information they provided will be anonymous • Inform the interviewee that they may withdraw whenever they want
2. General Information
Information here will be used to fill in the interview list
1. Could you introduce yourself and your position in the company? i. How many people are working in your department?
3. Innovation process before and during the COVID-19 outbreak
The interviewees will be asked to describe the innovation process before and during the COVID-19 outbreak, which relates to
• The standard of innovation performance in the SME before and during the COVID-19 outbreak
• The goals of explorations and exploitations in the SME before and during the COVID-19 outbreak
1. Could you concisely provide me with one innovative example in your company that you consider successful?
i. Why do you think it is successful?
2. How would you describe the process of reaching innovative goals or milestones for the company regarding:
i. stay innovative and competitive in the long run ii. successful in the short term
3. What is the impact on the innovation process or performance due to COVID-19?
4. What has changed in the way of accomplishing innovation goals change in your company during COVID-19 outbreak? (e.g., more uncertainties, fewer resources available)
4. Impact of COVID-19 on ambidextrous learning and innovative performance
The interviewees will be asked to describe the possible impact of ambidextrous learning and innovation performance during the COVID-19 outbreak, which relates to
• Resources · Resource constraints · Input on ambidexterity • Leadership · Impact of TMT • Knowledge · Confidential concerns
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1. To what extent do you think your department is flexible (from 1 to 10) i. Why do you think so?
2. Could you describe any changes regarding the input of reaching innovative goals, e.g., human capital, investment, etc.?
i. To what extent do you think this is sufficient for the project (from 1 to 10)? 3. What kind of help did you get from the top management teams? (if you are a member of
the innovation project) / What kind of help you provided to the members? (if you are one of the top managers)
i. What are other possible ways to help do you see?
4. Do you believe your company remain as innovative like before the COVID-19 outbreak? (or less? Or equal?)
i. Why do you think so?
5. Do you feel the core businesses in your department is hindered during the COVID-19 outbreak?
6. Could you describe the change among competitors and market during the COVID-19? i. Is the competition more severe?
5. Follow-up questions
Additional questions that add insights to the innovation process and performance of the SME • What are other possible ways to mitigate the negative impact of COVID-19 do you see? • What are other possible changes that will happen in your company in the future if the
