Exploration or Exploitation: Innovation Behavior of SMEs and Large Firms during the COVID-19 Crisis

Abstract

This paper contributes to the discussion on exploration and exploitation by analyzing the innovation behavior of SMEs and large firms during the first year of the COVID-19 pandemic in Germany. It provides a novel way to measure the type of firm innovation behavior in a dynamically changing environment. After collecting news articles about innovation activities conducted by firms, we applied text mining techniques to identify the positioning of each firm on the continuum from exploitation to exploration. The results of our analyses indicate three main dynamics: 1) all studied firms tend to conduct more explorative innovation activities during the COVID-19 crisis, 2) large and “technology-intensive” firms are more prone to perform explorative innovation activities than SMEs and firms that are not “technology-intensive”, and 3) technology intensity is associated with explorative innovation behavior during the crisis. Our results suggest that considering technology intensity and the size of firms is important for designing effective policies during crises.