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Exploratory versus exploitative innovation: SME performance implications of managerial ties and empowering leadership in China

ABSTRACT While exploration and exploitation represent two fundamentally different approaches to organisational innovation, recent literature has increasingly indicated the need for small and medium-size enterprises (SMEs) to manage these approaches. This study examines the linkages of managerial ties to exploratory and exploitative innovation and explores the moderating effects of empowering leadership on the linkages. The study results suggest that the positive relationship between political ties and exploratory innovation is weakened by empowering leadership, while the relationship between business ties and exploratory innovation is moderated positively by empowering leadership. Moreover, the study also finds that the positive relationship between business ties and exploitative innovation is strengthened by empowering leadership, while the moderating role of empowering leadership on the linkage between political ties and exploitative innovation is not significant. This study enriches the literature on social network theories and situational leadership theories in the Chinese context. Analyses of a sample of Chinese SMEs largely support our hypotheses.