Process Management and Technological Innovation: a Longitudinal Study of the Photography and Paint Industries

Adaptation in changing environments requires organizations to exploit existing capabilities while developing new ones. Yet this need for complex organizational capabilities has coincided with a wave of managerial practice focused on process management. We hypothesize that the increased routinization associated with process management leads to increases in exploitative technological innovation at the expense of exploration. We find support for our hypotheses with a longitudinal study of patenting activity and ISO 9000 quality program certifications in the paint and photography industries. Increases in the extensiveness of process management activities were associated with an increase in the ratio of exploitative to exploratory innovation. Exploitation appears to drive out exploration. We add depth to these results with field data on process management and innovation outcomes in two diversified firms. This research extends literature in learning and evolution by highlighting how these institutionally mandated organizational practices shift the balance of exploitation and exploration by optimizing for short-term efficiency at the expense of long-term adaptation.