Balancing exploration-exploitation renewal and Indonesian firm performance: do CEO power and TMT diversity matter?

Abstract This study evaluates how strategic renewal can optimize firm performance in Indonesia’s manufacturing sector, emphasizing the balance between exploitation renewal (refinement of existing capabilities) and exploration renewal (development of new competencies). Anchored in upper-echelons, paradox, and organizational-learning theories, we theorize that CEO power and top-management team diversity condition the effectiveness of this balance. Dynamic panel data from 127 firms listed on the Indonesia Stock Exchange between 2014 and 2019 are analyzed using the two-step System Generalized Method of Moments. Results reveal an inverted-U relationship between exploitation–exploration balance and performance, indicating an optimal mix of the two renewal modes. CEO power flattens this curve in the full sample, suggesting reduced responsiveness when authority is highly centralized. However, it is steeped in the technically complex basic and chemical industries, where strong leadership may facilitate integration. Top management team diversity similarly flattens the curve overall, yet steepens it within large and small firms, implying that diverse perspectives enhance institutional coordination or support agile decision making. These findings extend strategic-renewal research by demonstrating that leadership microfoundations alter the direction and intensity of ambidexterity’s performance effects in emerging-market settings.