The Long March: The Quest for Valid Text-Based Indicators of Firms' Exploration and Exploitation

Since the seminal work of March (1991) outlined the managerial challenge of balancing exploration and exploitation in organizational learning, multiple studies have analyzed the relationship between this balance and firm performance. Uotila et al. (2009) used the original keywords proposed by March to characterize firms’ orientation towards exploration using content analysis of news articles. Using a comparable dataset and methodology, our study cannot replicate the curvilinear relationship between firms’ exploration orientation and market value (Tobin’s q). We do confirm this relationship once we use an indicator based on a new set of keywords that passes a series of prescribed validity tests. We discuss implications for future research aiming to develop novel content-based indicators on firm strategies to be applied across empirical contexts.