| In this dissertation, I study the corporate strategies firms follow to gain and sustain superior profitability over time. Specifically, I formulate and test a theory of sustained corporate profitability that predicts the performance effects of key corporate actions under different environmental conditions.; Drawing on the behavioral theory of the firm and the work of March (1991), I conceptualize two types of learning actions at the corporate level. Corporate exploitation is the use and refinement of existing competences across related businesses. In contrast, corporate exploration consists of the pursuit of new knowledge through entry into new businesses. From all possible combinations of these two actions, I derive four possible corporate learning strategies.; The predicted performance ranking of the four corporate learning strategies under environmental stability from highest to lowest is the following: only corporate exploitation is better than engaging in both actions or neither, both of which lead to higher performance than only corporate exploration.; However, during an environmental change, firms which only engaged in corporate exploration prior to the environmental shift will be the best performers, followed by firms which combined corporate exploitation and corporate exploration, those that did neither, and finally, those that only carried out corporate exploitation. Therefore, I posit that to adapt to uncertain, future environmental changes, firms need to combine corporate exploitation and exploration.; I test these hypotheses in a panel of U.S.-incorporated public phone companies during the period of 1979–2000, a period of substantial regulatory change. The results show that, under environmental stability, only engaging in corporate exploitation leads to greater profitability than combining both corporate exploitation and exploration, or engaging in neither, which are, in turn, superior to carrying out only corporate exploration. However, although there are differences across different environmental periods, the results do not support the performance ranking of the corporate learning strategies under environmental change: only corporate exploitation is superior to corporate learning inactivity.; This dissertation contributes to two research streams: first, it extends the emerging behavioral theory of adaptation to the corporate level; second, it provides evidence for the advantages of related diversification under both environmental stability and change. |
