The Formation and Effects of Exploitative Dynamic Capabilities and Explorative Dynamic Capabilities: An Empirical Study

Although previous studies have explored the formation and effects of dynamic capabilities, much remains to be learned on this topic. There has been little research on the formation and effects of exploitative dynamic capabilities and explorative dynamic capabilities. This paper provides an explanation of how entrepreneurial leadership style and slack resources affect the formation of exploitive dynamic capabilities and explorative dynamic capabilities and evaluates the effects of exploitive dynamic capabilities and explorative dynamic capabilities on competitive advantage. Based on a sample of 382 Chinese firms, the empirical results show that a transactional leadership style and absorbed slack resources can encourage the formation of exploitative dynamic capabilities, and that a transformational leadership style and unabsorbed slack resources are conducive to the development of explorative dynamic capabilities. Furthermore, exploitative dynamic capabilities and explorative dynamic capabilities can reinforce and complement each other. Exploitative dynamic capabilities positively impact explorative dynamic capabilities, and explorative dynamic capabilities enhance exploitative dynamic capabilities. In particular, exploitative dynamic capabilities have an important effect on short-term financial performance, and explorative dynamic capabilities lead to a significant long-term competitive advantage. The results show that explorative dynamic capabilities surpass exploitative dynamic capabilities in terms of competitive advantage, even if both have a positive influence on competitive advantage. This study validates and develops the theory of dynamic capabilities.