The impact of top management team's innovation orientation on organizational ambidexterity in transitional economies: Evidence from Bosnia and Herzegovina

Organizational ambidexterity plays an essential role in understanding how firms compete and prosper in dynamic environments. However, our understanding of the antecedents and effects of organizational ambidexterity is primarily derived from studies conducted in developed economies, while transitional economies with their unique characteristics and challenges are less well understood. Grounded in upper echelon theory, this paper contends that the innovation orientation of a firm’s top management team (TMT) impacts organizational ambidexterity and firm performance. Drawing on a dataset of 192 small and medium-sized companies from Bosnia and Herzegovina, and estimating several OLS regressions, we find evidence that TMT’s innovation orientation negatively impacts firm performance in transitional economies. Further, we see that the impact of the TMT’s innovation orientation on the balance dimension of organizational ambidexterity is inverted U-shaped. Organizational innovation culture leverages this relation. Intriguingly, we found that in transitional economies, organizational ambidexterity was not correlated with firm performance, but its components exploration and exploitation were, albeit in opposite directions. Overall, our work ads nuanced insights to the antecedents and effects of organizational ambidexterity in transitional economies. • Our empirical study shows that in transitional economies, the top management team’s innovation orientation tends to inhibit superior firm performance. • Our empirical study shows that in transitional economies, organization innovation culture orientation tends to inhibit superior firm performance. • We find empirical evidence that the impact of the top management team's innovation orientation on organizational ambidexterity follows an inverted U-shaped curve, and that organizational innovation culture leverages this relationship. • We posit that in extremely dynamic and volatile environments, such as transitional economies, balanced organizational ambidexterity may be non-beneficial for firms, in contrast to specialization in exploitation. • We demonstrate that an imbalance in organizational ambidexterity towards exploration negatively affects firm performance, whereas an imbalance towards exploitation has a positive impact on firm performance in transitional economies.