Exploration and exploitation in virtual organizations

Abstract

As a number of organizations are globalized, virtual organizations that use e-mail to communicate and coordinate their work have become ubiquitous today. This paper aims to examine how the topology of e-mail networks and the turnover of highly connected individuals (i.e. hubs) affect organizational learning. We simulate an organization where a few hubs dominate communication channels and then systematically vary the interaction pattern by controlling the rates of hub turnover. We found that the structure of e-mail networks is conducive to the exploitation of organizational knowledge, increasing the efficiency of organizational learning; but, it is detrimental to the exploration of innovative knowledge, driving out the diversity of individual knowledge. We also found that a small fraction of hub turnover is beneficial for organizational learning by enabling superior ideas to diffuse through a population without reducing organizational knowledge diversity too quickly.