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JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.. Academy of Management is collaborating with JSTOR to digitize, preserve and extend access to The Academy of Management Journal.When adaptation requires innovation, or the creation of variety, exploration is crucial. High levels of exploration thus imply variance-seeking rather than mean-seeking learning processes. In a study of 56 new business development projects, given high exploration, organizational learning was more effective when the projects operated with autonomy with respect to goals and supervision. As degree of exploration decreased, better results were associated with less autonomy on both counts. This contingent effect persisted even when I controlled for the emergence of deftness and comprehension.To survive in Schumpeterian environments, organizations must be able to cope with increasing complexity and high-velocity change (Brown & Eisenhardt, 1998;Schumpeter, 1950). The principle of requisite variety suggests that effective adaptation requires sufficient internal variety (Ashby, 1952). Internal variety, in turn, is associated with exploration (March, 1991), involving the search for new organizational routines and the discovery of new approaches to technologies, businesses, processes, or products. Internal variety is relevant to several theoretical traditions: it is viewed as determination to gain new information at the expense ofimproving present returns in the rational choice model, as the core element of search in theories of limited rationality, as invention in theories of organizational learning, and as the pursuit of variation in evolutionary models. In short, exploratory learning is critical to the capacity of an organization to create variety, and hence, to adapt.Although the importance of learning to adaptation is hardly controversial, managing exploratory learning is not well understood. My purpose in this study was to examine how managerial oversight processes influenced exploratory learning in new business development projects.One perspective on learning emphasizes discovery through enactment and interpretation. Retrospective sense making acts as a selection mechanism (Daft & Weick, 1984;Weick, 1979). Success depends upon generating enough variations that at least some will prove ex post to yield desirable results. The consequence of this form of learning is increased performance variance.

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Although failure in entrepreneurship is pervasive, theory often reflects an equally pervasive antifailure bias. Here, I use real options reasoning to develop a more balanced perspective on the role of entrepreneurial failure in wealth creation, which emphasizes managing uncertainty by pursuing high-variance outcomes but investing only if conditions are favorable. This can increase profit potential while containing costs. I also offer propositions that suggest how gains from entrepreneurship may be maximized and losses mitigated. Schumpeter linked wealth creation directly to the entrepreneurial process, through which "new combinations" of factors of production are introduced into an economic system (1950: 83). Entrepreneurship creates new processes, puts underutilized resources to new uses, initiates the formation of new industries, and otherwise unleashes "gales of creative destruction" (Schumpeter, 1950: 83). It has been linked to creation of employment, increases in productivity, and improvement of living standards, and to economic growth in general (Baumol, 1993; Birch, 1979). Consequently, scholars often regard entrepreneurship as quite a good thing (see Birley, 1986, and Lumpkin & Dess, 1998). Embracing entrepreneurship, however, implies accepting all that goes with it, particularly the recognition of a priori irreducible uncertainty (Venkataraman, 1997). One manifestation of uncertainty is highly variable-or risky-returns (Lubatkin & Chatterjee, 1994: 110). Risk can become manifest in failure (Miller & Reuer, 1996).