Title: The effects of exploration and exploitation on stock price movement: the moderating effect of firm size and market condition

Authors: Gun Jea Yu; Kihoon Hong

Addresses: College of Business Administration, Hongik University, 72-1 Sangsu-Dong, Mapo-Gu, Seoul, South Korea ' College of Business Administration, Hongik University, 72-1 Sangsu-Dong, Mapo-Gu, Seoul, South Korea

Abstract: This research delved into the intricate relationship between exploration, exploitation, and stock price movements. Our investigation also extended to examining how firm size (an internal factor) and stock market condition (an external factor) exerted their moderating influences. Drawing from a comprehensive dataset of 15,984 firm-year observations across diverse industries, our findings unveiled a nuanced picture. Specifically, we observed a negative stock price response to exploration, contrasting with a positive response to exploitation. Interestingly, the interplay of firm size and market condition yielded significant moderation effects, highlighting the amplified positive stock price response to exploitation in the context of larger firms and favourable market returns. Further scrutiny revealed a compelling insight: firms' decisions concerning innovative initiatives were predominantly driven by their quest for long-term performance, rather than solely catering to investors' interests. As a result, our study underscores the importance of a holistic perspective, incorporating external tensions, for a comprehensive grasp of the delicate balance between exploration and exploitation.

Keywords: exploration and exploitation; stock price movement; patents; moderating effect.

DOI: 10.1504/IJEIM.2024.140355

International Journal of Entrepreneurship and Innovation Management, 2024 Vol.28 No.1/2, pp.93 - 107

Received: 12 Jan 2023
Accepted: 14 Dec 2023
Published online: 05 Aug 2024 *

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