Exploitative Learning and Entrepreneurial Orientation Alignment in Emerging Young Firms: Implications for Market and Response Performance*

We examine exploitative learning and entrepreneurial orientation (EO) in emerging young high technology firms located within business incubators. In the last five years, the UK government has invested approximately £125m in incubation activities. The rationale for supporting business incubation is to maximize knowledge sharing across firms with an expectation that it will leverage performance. This represents exploitative learning – the acquisition of established knowledge that carries clear known value and outcomes. Paradoxically, research into EO has repeatedly emphasized the value of knowledge created through exploratory learning mechanisms (‘play, discovery and experimentation’) in securing advantage. Theoretical and empirical questions are raised herein with regard to the value of exploitative learning within a network context which might negatively influence the impact of EO on the firm. Using configuration theory, we demonstrate that firms cannot sustain dual‐dominant orientations of exploitative learning and EO. A strongly configured EO generates high performance returns. However, multi‐group analysis reveals that these effects are particularly strong for those firms whose exploitative learning is weak. Implications and directions for future research are discussed.