Co‐evolution of exploration‐exploitation strategy and weak‐strong ties portfolios: A longitudinal case study

Abstract

This paper explores the interactive relationship between exploration‐exploitation strategy and alliance portfolios evolution, through examining underlying motivations of the evolution of alliance portfolios along with firm strategy change. Based on a 20‐year longitudinal case analysis on a leading Chinese pharmaceutical manufacturer, we establish a three‐stage process model: (1) stage 1: under turbulent environment and with the consequent reduction in profitability, the firm implements exploration strategy and forms weak alliance portfolio; (2) stage 2: the firm transforms its strategy from exploration to exploitation and forms strong alliance portfolio; and (3) stage 3: as this single business firm transforms into a multibusiness firm, it tends to make a balance between exploration and exploitation strategy and form weak‐strong alliance portfolio. Based on this process model, this study reveals the diverse motivations of alliance portfolios evolution along with firm strategy change, the interplay mechanisms between exploration‐exploitation strategy and weak‐strong ties portfolios, and the portfolio effects across businesses within a firm.