How Do Startups Integrate Strategies to Achieve Ambidexterity? Evidence from the Chinese Education-Technology Industry

Abstract

The paper examines how startup organizations integrate strategies to achieve ambidexterity through an inductive study of three ventures in the Chinese education-technology industry. The paper utilizes a multicultural perspective on the nature of ambidexterity and contributes a conceptual framework of how startups in China sustain long-term competitive advantage through strategy integration. The concept of ambidexterity focuses on balancing the tensions between two strategic approaches: exploration (of new opportunities) vs. exploitation (of one’s core business). While existing literature illustrates the importance and challenges attaining ambidexterity given resource-constraints, there is limited examination on how startups integrate strategies to balance this tension. I thus ask: How can startups in China effectively integrate strategies to balance the tension between explorative and exploitative approaches? What are the specific building blocks of strategies implemented by these startups? This study follows an inductive grounded theory approach to build theory on how startups integrate strategies to attain ambidexterity. With an inductive research process, the study is exploratory: I study three ventures in a nascent industry in China—education technology (“edtech”) —to uncover patterns and interrelationships between theoretical constructs that emerged from the qualitative data. The three startups share similar founding timelines, size, and business offerings. I conducted onsite observations and semi-structured interviews, which served as the main source of data. I complemented this hand collected data with archival data (e.g. news articles) about the companies and industry. I find that startups utilize structural approaches to effectively integrate strategies and I inductively uncover three common integration mechanisms. While previous studies suggest that strategic tensions are balanced at the firm level, I go within the firm and find that differing levels of management (executive and frontline level) utilize different structures for integration and have differing strategic focus. While the executive level focuses on exploration as well as on integration, the frontline level is structurally independent and is primarily exploitation-oriented. To integrate these two approaches together, I find that startups commonly employ three mechanisms: (1) at the cognitive level, startups form a collectivist organizational identity so that employees with different roles still feel that they are all working towards the same common endgoal; (2) at the organizational structure level, startups use some variation of a "Strategy & Planning" department to manage the functional processes of redirect firm strategy while maintaining core firm focus; and (3) at the organizational design level, startups construct reward systems to align incentives for strategic integration within the startup. This unique approach enables each of employees to maximize their resources and capabilities, thus pushing the firm to sustain its competitive advantage. Synthesizing all parts together, these findings shed light on how executive and frontline levels of startups interact throughout strategy integration. Overall, by engaging in intensive field work to go inside the “black box” of the firm, this paper provides a rich, process-oriented perspective on how startups integrate conflicting tensions (exploration vs exploitation) to achieve long-term success in nascent markets. I hope that with the growth of quantitative “big data”, the theoretical framework that I present can be tested in future research.