Exploratory innovation, exploitative innovation and operational performance: influence of informal social relations in environmental competitiveness

The objectives of this study are to examine the influence of knowledge sharing and inter-departmental connectedness on exploratory innovation, exploitative innovation, and firm’s operational performance; the influence of exploratory and exploitative innovations on firm’s operational performance; and the moderating effect of environmental competitiveness. The data was collected from the banking industry in Bangladesh through a cross-sectional survey of 241 managers and analyzed through structural equation modeling using SmartPLS software. Findings show that knowledge sharing, and inter-departmental connectedness contribute to develop both exploratory and exploitative innovation as well as enhance firm’s operational performance. Moreover, exploratory and exploitative innovation influences a firm’s operational performance. Finally, environmental competitiveness negatively affects the relationship of knowledge sharing and inter-departmental connectedness with operational performance. The findings emphasize the flexible and informal social relations among people in creating effective exploratory and exploitative innovation and enhancing firms’ operational performance. It suggests that knowledge sharing, and inter-departmental connectedness as an informal and flexible coordination mechanism are more important in predicting operational performance if the level of environmental competitiveness is low.