The Knowledge Strategy Orientation Scale: Individual Perceptions of Firm-Level Phenomena

One of the most serious threats to the relatively new field of strategic management research is poor construct measurement (Boyd et al., 2005). Due to the relatively complex nature of strategic management variables, quality of measurement is crucial (Godfrey and Hill, 1995) and strategic management research must place greater emphasis on research design, construct validation, and more sophisticated analytical techniques (Bergh, 2001). Many researchers tend to operationalize latent constructs with the use of proxy variables. For example, Boyd et al. (2005) found that constructs such as available organizational resources, public profile, core rigidity, and ability to initiate competitive action have all been operationalized by single-item archival measures of organizational size. Additionally, organizational size can be measured as number of employees, number of products, number of production facilities, or any of at least a dozen other measures. The reliance on single-item measures to the exclusion of multi-item scales virtually ensures that research is conducted with unreliable measures that attenuate results. More importantly, there is a clear question of validity. Does organizational size truly represent core rigidity, ability to initiate competitive action, or something altogether different? Additionally, Payne et al. (2003) suggest that the use of archival data has several disadvantages. These include the fact that the data may have been originally collected for some other purpose, there may be missing data points, archival data may be susceptible to experimenter bias as some researchers might examine the data before they propose hypotheses, and that archival data may not be readily analyzable. Given that all of the above are distinct problems plaguing strategic management research, the truly important issue is that there is no real valid representation of many key constructs. In fact, Boyd et al. (2005) call for the development of new multi-indicator measures for constructs in strategic management research, especially for more contemporary approaches to strategy. Traditional research in strategic management has used a variety of measures for the Miles and Snow (1978) typology of prospectors, analyzers, defenders, and reactors, and the Porter (1980) typology of low cost, differentiation, and focus. However, these approaches to strategic management have been criticized for a variety of reasons (see Grant, 2005). Today, the school of strategy that is attracting a wide degree of attention is the knowledge-based view of the firm, with its typology of exploration and exploitation knowledge strategies. However, an acceptable multi-indicator measure of these constructs has not been generally accepted in the literature. Thus, the purpose of our study is to examine the factor structure of responses to items designed to measure the knowledge strategy constructs of exploration and exploitation and to provide evidence of external validity using other measures of theoretically-related variables. In keeping with this concern for greater methodological rigor we suggest that the further delineation of these two constructs is appropriate and necessary for future research in this area. In the sections that follow, we give some insight into the theoretical background of our focal constructs, an overview of our analytical methods, the results of our analysis, and a discussion of these results. THEORETICAL BACKGROUND A knowledge strategy can be viewed as a firm's set of strategic choices regarding two knowledge domains: 1) exploration, or the creation or acquisition of new knowledge and 2) exploitation, or the ability to leverage existing knowledge to create new organizational products and processes. A firm's knowledge strategy guides its resource allocation--the degree to which the firm focuses its resources on either generating radically new knowledge or incrementally enhancing the existing knowledge base (March, 1991; Bierly and Chakrabarti, 1996). …