In the resource‐based view of strategy and in evolutionary economics, complementary assets play a crucial role in explaining sustainable competitive advantages and innovations. Despite the apparent importance of complementary assets for the understanding of corporate strategy, their creation and the associated managerial problems have been much less discussed. We believe this to be a major weakness in the strategic theory of the firm. Interestingly, problems of coordination and cooperation are center stage in the contract‐based theories of the firm, and we try to integrate some of their insights into a resource‐based perspective. Specifically, we show how complementary assets raise the need for strategic direction by a firm's top management. Moreover, complementary assets magnify internal incentive problems, and their management has an impact on the innovativeness of a firm. Lastly, complementary assets play a crucial role in the internal appropriation of innovative rents. We demonstrate the fruitfulness of our integrated framework by relating some of our findings to the literature on corporate strategy, industry evolution, and organizational structures. Copyright © 2007 John Wiley & Sons, Ltd.

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Research summary: We address conflicting claims and mixed empirical findings about adaptation as a response to increased environmental dynamism. We disentangle distinct dimensions of environmental dynamism—the direction, magnitude, and frequency of change—and identify how selection shapes adaptive responses to these dimensions. Our results show how frequent directional changes undermine the value of exploration and decisively shift performance advantages to inert organizations that restrict exploration. In contrast, increased environmental variance rewards exploration. Our results also show that, in dynamic environments, the best‐performing organizations are generally more inert than less successful organizations. Managerial summary: Our research helps managers to understand under what business conditions investments into exploration and strategic flexibility are more likely to pay off. Dynamic business environments characterized by persistent trends and by large, infrequently occurring structural shocks reward strategic pursuit of temporary advantage. Thus, exploration and strategic flexibility are preferred strategies. In contrast, the challenge in frequently changing environments with fleeting opportunities is to identify and to focus on strategic actions whose payoffs on average are high, independent of environmental volatility. Low levels of exploration and long‐term strategic focus are preferred strategies in these circumstances. Copyright © 2015 John Wiley & Sons, Ltd.

This paper presents findings from a laboratory experiment on human decision making in a complex combinatorial task. We draw on the canonical NK model to depict tasks with varying complexity and find strong evidence for a behavioral model of adaptive search. Success narrows down search to the neighborhood of the status quo, whereas failure promotes gradually more exploratory search. Task complexity does not have a direct effect on behavior but systematically affects the feedback conditions that guide success-induced exploitation and failure-induced exploration. The analysis also shows that human participants were prone to overexploration, since they broke off the search for local improvements too early. We derive stylized decision rules that generate the search behavior observed in the experiment and discuss the implications of our findings for individual decision making and organizational search.

The creation of novel strategies, the pursuit of entrepreneurial opportunities, and the development of new technologies, capabilities, products, or business models all involve solving complex problems that require making a large number of highly interdependent choices. The challenge that complex problems pose to boundedly rational managers—the need to find a high-performing combination of interdependent choices—is akin to identifying a high peak on a rugged performance “landscape” that managers must discover through sequential search. Building on the NK model that Levinthal introduced into the management literature in 1997, scholars have used simulation methods to construct performance landscapes and examine various aspects of effective search processes. We review this literature to identify common themes and mechanisms that may be relevant in different managerial contexts. Based on a systematic analysis of 71 simulation studies published in leading management journals since 1997, we identify six themes: learning modes, problem decomposition, cognitive representations, temporal dynamics, distributed search, and search under competition. We explain the mechanisms behind the results and map all of the simulation articles to the themes. In addition, we provide an overview of relevant empirical studies and discuss how empirical and formal work can be fruitfully combined. Our review is of particular relevance for scholars in strategy, entrepreneurship, or innovation who conduct empirical research and apply a process lens. More broadly, we argue that important insights can be gained by linking the notion of search in rugged performance landscapes to practitioner-oriented practices and frameworks, such as lean startup or design thinking.