STRATEGIC ENTREPRENEURSHIP: EXPLORATION, EXPLOITATION, AND AMBIDEXTERITY PRACTICES IN CRAFT BREWERIES FROM UBERLÂNDIA, MG¹

EMPREENDEDORISMO ESTRATÉGICO: EXPLORATION, EXPLOITATION E AMBIDESTRIA EM CERVEJARIAS ARTESANAIS DE UBERLÂNDIA, MG

JULIANE SILVESTRE

Federal University of Uberlândia (UFU), Brazil

ALEX F. BORGES alexfborges@gmail.com

Federal University of Uberlândia (UFU), Brazil

VERÔNICA A. F. PAULA

Federal University of Uberlândia (UFU), Brazil

Entrepreneurship is a phenomenon with socioeconomic and scientific relevance and an object of increasing interest in academia (Lopes & Lima, 2019; Wiklund, Wright, & Zahra, 2019). The configuration of this field has developed around different theoretical aspects, which has contributed to generating several research possibilities (Clark & Harisson, 2019).

One of the possibilities for understanding and explaining the entre­preneurial phenomenon lies in the notion of strategic entrepreneurship, associated with the analysis of innovations and strategic renewal processes in organizations (Hitt, Ireland, Camp, & Sexton, 2001; Kuratko & Audretsch, 2009). Mazzei (2018) points out that this approach is based on two central points: exploration, linked to the creation and identification of new business opportunities, and exploitation, related to taking advantage of existing opportunities (Gupta, Smith, & Shalley, 2006; Popadiuk & Bido, 2016). From the balance between exploration and exploitation, the concept of ambidexterity, or organizational ambidexterity, emerges (Cao, Gedajlovic, & Zhang, 2009; Birkinshaw & Gupta, 2013; Koriak, Lockett, Hayton, Nicolaou, & Mole, 2018; O’Reilly & Tushman, 2013).

The strategic entrepreneurship approach has been applied to the analysis of organizations from different branches of economic activity (Goel & Jones, 2016; Mazzei, 2018). In this article, we chose to investigate craft breweries, an emerging industry in Brazil (Dalmoro & Fell, 2020; Freitas, 2015; Giorgi, 2015; Krohn, 2018; Santo & Carniello, 2019; Tonelli, Borges, Brito, & Zambalde, 2018). According to Brazil´s Ministry of Agriculture, Livestock and Supply, in 2019, the craft beer business grew 36% compared to 2018 (Ministério da Agricultura, Pecuária e Abastecimento – Mapa, 2020). Some regions in the country are relevant in this market. In Uberlândia, in the state of Minas Gerais, there is considerable investment in this industry, encouraged by government actions through the Municipal Program to Promote the Beer Industry, instituted in 2017 (Prefeitura Municipal de Uberlândia, 2017).

Therefore, the purpose of this article is to understand the configuration of strategic entrepreneurship practices of exploration, exploitation, and ambidexterity in craft breweries in Uberlândia-MG. For this purpose, through a qualitative study of multiple cases, we specifically sought to understand the practices of exploration related to radical innovation, the practices of exploitation related to incremental innovation, and the practices of ambidexterity that work as a balance between the previous ones.

The concept of strategic entrepreneurship has been increasingly explored in entrepreneurship studies (Mazzei, 2018), although it is still not widely explored in these studies in Brazil (Borges, Parreira, Enoque, & Almeida, 2017; Moraes & Lima, 2019). It is an alternative that allows the under­standing of issues related to the entrepreneurial phenomenon, from the recovery of perspectives associated with possibilities of innovation and strategic renewal processes (Kuratko & Audretsch, 2009).

According to Hitt et al. (2001), strategic entrepreneurship is constituted from two main characteristics, associated with the creation and support of competitive advantages and with the processes of identification and exploitation of business opportunities. Mazzei, Ketchen, and Shook (2017), in turn, when synthesizing the theoretical framework on the referred approach, highlight that this approach is based around the notion of exploration and exploitation, developed from March’s (1991) research.

The concept of exploration is related to the creation and/or discovery of new business opportunities through the use of creativity, application of innovations, and experimental developments (Gupta et al., 2006), always being viewed as an exogenous category of strategic entrepreneurship (Chen, 2017; Koriak et al., 2018). Authors such as Andriopoulos and Lewis (2009) and Moss, Payne, and Moore (2014) define exploration as organizational activities that are associated with elements such as the focus on research and development, the ability to take risks, the exercise of autonomy, the relationship with the external environment in a state of entrepreneurial alertness, and the promotion of an innovative and adaptive internal environment, open to new discoveries and new experiences.

In turn, the concept of exploitation is related to taking advantage of opportunities linked to activities that already exist within the organization. These initiatives aim to transform and use skills to improve organizational processes and to solve problems (Goel & Jones, 2016), consequently being viewed as an endogenous category of strategic entrepreneurship (Fuentes, Arroyo, Bojica, & Pérez, 2010). It is observed, then, the formation of activities directed to the continuous improvement of processes, methods, techniques, actions, products or services, new means of production or execution of an activity, and implementation of new practices in an efficient way (Popadiuk & Bido, 2016; Luger, Raisch, & Schimmer, 2018).

In this way, exploration is attributed a more significant association with radical innovation, while exploitation is linked to incremental innovation (Andriopoulos & Lewis, 2009; Borges, Lima, & Andrade, 2014; Chen, 2017). Based on this, the need for consistency between exploration and exploitation practices is emphasized, which would imply higher levels of performance at the firm level (Gupta et al., 2006; Moss et al., 2014). It is, therefore, necessary to recognize the emergence of strategic entrepreneurship as a result of a balance between exploration and exploitation, which opens space for ambidexterity, or organizational ambidexterity (Cao et al., 2009; Luger et al., 2018; O’Reilly & Tushman, 2013).

Ambidexterity can be observed through analyzes of contradictory dualities at the organizational level (Duncan, 1976), such as efficiency and effectiveness, radical and incremental innovation, and exploration and exploitation (Birkinshaw & Gupta, 2013; Chen, 2017; Gibson & Birkinshaw, 2004; Raisch & Birkinshaw, 2008). In this scenario, organizations make decisions about strategies of flexibility and efficiency, adaptation and strategic renewal, and exploration of new and current competences (Koriak et al., 2018; Popadiuk & Bido, 2016). Therefore, it can be said that ambidexterity portrays the organization’s ability to improve and perfect existing routines and methods and, at the same time, to adapt to changes that occur from the development of new opportunities (Birkinshaw & Gupta, 2013). With that, the referred conception constitutes the base for the performance, competitiveness, and survival in the market (Birkinshaw & Gupta, 2013; Raisch & Birkinshaw, 2008; Severgnini, Takahashi, & Abib, 2019).

Therefore, ambidexterity is strongly associated with the notion of strategic entrepreneurship, as it reflects the potential for intervention of exploration and exploitation actions on organizational reality (Andriopoulos & Lewis, 2009; Mazzei, 2018). In other words, it is about the balance between tradition and renewal, based on their capacity for innovation (Borges et al., 2014; Moss et al., 2014). Thus, ambidexterity establishes itself as the organizational capacity to manage exploration and exploitation in order to achieve a balance between the efforts and results of innovations (Chen, 2017; Luger et al., 2018). Thus, organizations must add practices of strategic entrepreneurship in their processes and actions, which indeed reveals the theoretical and practical potential that this concept assumes for the discussion and broader scientific investigation in the field of entrepreneurship.

In this article, a multiple case study was carried out with qualitative guidance (Denzin & Lincoln, 2006; Stake, 2000), which enabled the exploration of particularities associated with entrepreneurship with due depth and density (Neergaard, & Ulhøi, 2007). This allowed us to understand the configuration of strategic entrepreneurship from the manifestation of exploration, exploitation, and ambidexterity practices in craft breweries in Uberlândia, a city located in the Triângulo Mineiro region, in the state of Minas Gerais, in Brazil. This city has stood out in the production of craft beer in the state of Minas Gerais, mainly due to the quantity of producing units and the quality of the beverage produced by them.

In order to make the research operational, the following criteria were used to select the cases studied: 1. the historical trajectory of organizations in the craft beer industry; 2. the degree of the particularity of the cases, verified through their competitive differentials and the development of innovations in their products and processes; 3. the relevance of the case in the regional context, taking into account its market share; and 4. the formalization of the business and, mainly, the production registration with the Brazilian Ministry of Agriculture, Livestock and Supply (Mapa). Currently, Uberlândia has ten formal breweries, five of which met the criteria mentioned, with three cases selected for this article.

The data were collected between September and November 2019, using the interview technique (Fontana & Frey, 2011; McKenzie, 2007). This activity included personal meetings between the team of researchers and the agents interviewed in the space of the studied breweries – factory, administrative offices, pubs, restaurants, or bars. Nine interviews were carried out in total, three in each company, all of them with written authorization from the interviewees. The number of interviews was defined based on the number of central agents involved in each of the studied breweries. The criterion of data saturation was also considered, observing when it was found that new personal meetings for data collection would not add relevant evidence to the investigation reported (Fontanella, Ricas, & Turato, 2008). Figure 3.1 presents the categorization of the companies studied and the agents interviewed in detail.

Figure 3.1
CRAFT BREWERIES AND AGENTS INTERVIEWED

The interviews were conducted with the support of a script (Gaskell, 2010), composed of open questions aimed at elucidating the following points: 1. historical trajectory of the studied breweries, pointing to events such as the foundation, the emergence, and the characterization of the organization; 2. evolution and growth of companies over time, pointing to strategic, competitive and market elements; and 3. recovery of strategic entrepreneurship practices, problematizing the processes that could be framed as exploration, exploitation and ambidexterity initiatives.

Finally, it should be noted that the data collected were treated based on the technique of narrative analysis (De La Ville & Mounoud, 2010). Through the integrated reading of all the transcripts, we proceeded to identify narratives that illustrate the different practices observed in the companies studied. In order to do so, narratives about events such as the creation of the business, the process of creating and/or identifying opportunities, their evolution and formalization, and aspects related to innovation practices in the production and marketing of craft beers were mapped. This procedure allowed the identification of the central narratives reported in each company studied that could later be associated with the theoretical categories of strategic entrepreneurship – exploration, exploitation, and ambidexterity –, thus forming a broader framework that enabled the construction of the analyzes and discussions that were undertaken, enabling the achievement of the research purpose.

In this topic, the configuration of strategic entrepreneurship in craft breweries in Uberlândia-MG is explored, emphasizing the manifestation of exploration, exploitation, and ambidexterity practices, which will be listed in the following sections.

4.1

Exploration practices in craft breweries

Exploration practices are close to the concept of radical innovations (Borges et al., 2014; Chen, 2017), being observed in actions aimed at creating and/or discovering new business opportunities (Andriopoulos & Lewis, 2009; Luger et al., 2018). Therefore, initially, there is the creation of the studied craft breweries as an exploration practice, as these initiatives represented processes of identification of innovative opportunities in the local market (Figure 4.1.1).

Figure 4.1.1
EXPLORATION PRACTICES IN THE CREATION OF CRAFT BREWERIES

The narratives reveal different trajectories of opening craft breweries linked to the notion of exploration. Brewery A is considered as the first craft brewery installed in the Triângulo Mineiro region, an innovative business that brought a new type of proposal to the market through the offer of a differentiated product, which can be seen as a specifically situated innovation from a regional perspective (Ferreira, Vasconcelos, Judice, & Neves, 2011). The case of brewery B reveals the opening of a business based on an opportunity little explored in the local market, given that it is an emerging industry of activity (Krohn, 2018; Santo & Carniello, 2019). Brewery C reflects the creation of a company based on an innovative business model (brewpub) from a local and regional point of view.

At the same time, the creation of new products denotes the apprehension of new possibilities for the studied companies and for the beer industry in Uberlândia, which can be interpreted as exploration situations (Figure 4.1.2).

The narratives illustrate the creation of beer recipes involving their own interpretations of beverage types already known locally and the exploration of types unknown by the local public – a relatively common strategy but significant to the institutionalization of the industry (Tonelli et al., 2018). In the cases of breweries A and B, the introduction of new types of beer was based on decisions and preferences of the entrepreneurs and on market and consumer influences. In the case of brewery C, there was a product development process based on the creation of new recipes, forming a portfolio with unique beer types in the local market. With this, exploration practices are configured based on a specific type of product innovation (Ferreira et al., 2011).

Figure 4.1.2
EXPLORATION PRACTICES IN THE CREATION OF NEW PRODUCTS

In addition, exploration practices were also observed in craft beer production and marketing activities (Figure 4.1.3).

Figure 4.1.3
EXPLORATION PRACTICES IN CRAFT BEER PRODUCTION AND MARKETING ACTIVITIES

Respondents reported the construction of different innovative practices around the development of craft beer production and marketing activities (Carmona, Cerutti, Gomes, & Melo, 2017; Ferreira et al., 2011; Freitas, 2015; Krohn, 2018; Santo & Carniello, 2019). From the production point of view, these practices included the creation of equipment exclusively dedicated to the processes of filtering, storage, manufacturing, and filling, and the use of inputs (yeasts, enzymes, etc.) specifically developed for the production of the beverage. From the commercialization point of view, there were initiatives to position the company and increase its market share, involving actions such as the creation of channels for the sale of beer and the search for access to new markets and consumers.

Therefore, there is recognition of the importance of opening the studied craft breweries, creating new products, as well as introducing these production, marketing, and market innovations, as decisions and actions that can be viewed within the scope of the exploration category (Severgnini, Galdamez & Vieira, 2018; Moraes & Lima, 2019). Considering this, it appears that this notion of exploration constitutes a conceptual category to be observed in the broader plan of strategic entrepreneurship and can be considered as a starting point for understanding the specificities of this phenomenon within the studied organizations on the craft beer industry, from aspects such as the creation of the business itself, as well as the creation of new products, production processes, and marketing strategies. Thus, the analyzed and discussed initiatives of the breweries illustrate and elucidate the manifestation of exploration practices, reinforcing the dynamism and competitiveness of the studied craft breweries in the industry.

4.2

Exploitation practices in craft breweries

Associated with exploration actions, exploitation practices were observed in particular situations in the context of the studied craft breweries. These practices are related to taking advantage of opportunities already identified and involve continuous improvement and refinement of products, services, methods, and processes established in the organization (Goel & Jones, 2016; Moraes & Lima, 2019; Popadiuk & Bido, 2016). It is, therefore, an endogenous category of strategic entrepreneurship, close to the concept of incremental innovation (Fuentes et al., 2010).

Initially, exploitation practices were observed in actions aimed at incremental product innovations and craft beer production (Figure 4.2.1).

Figure 4.2.1
EXPLOITATION PRACTICES ASSOCIATED WITH CRAFT BEER PRODUCTION

Decisions and actions for product exploitation and craft beer production include initiatives that contributed to the optimization of processes, increased production capacity, and maximized efficiency and productivity, which made it possible to introduce changes in the beer produced and offered to the consumer market (Ferreira et al., 2011). There was also the introduction of continuous refinements that involved the use of differen­tiated inputs, such as imported malt and hops, selected yeasts developed in the laboratory, water with special treatments, and the use of enzymes, lactobacilli, and additives to enhance the quality of craft beers (Krohn, 2018). The interviews also revealed improvements related to the adoption of new technologies with the acquisition of new machines and equipment.

In parallel, exploitation initiatives were also identified in decisions and actions to commercialize craft beer (Figure 4.2.2).

Figure 4.2.2
EXPLOITATION PRACTICES ASSOCIATED WITH CRAFT BEER MARKETING

It was found that the breweries explored the realization of events and marketing actions aimed at customer loyalty and the definition of strategies to better explore their points of sale – factory, brewpubs, bars, and restaurants. In addition, the breweries engaged into partnerships with distributors in order to sell their production and increase their field of action from a regional perspective, and also invested in the distribution itself, of external sales, to explore the local market.

In this way, exploitation practices can be viewed as incremental innovations (Carmona et al., 2017; Ferreira et al., 2011), demonstrating the potential for exploring opportunities already accessed by the entrepreneurs of the studied craft breweries in an increasingly competitive industry. These actions reflect on the quality of the product that is offered to consumers. Thus, strategic entrepreneurship relates the practices of exploration and exploitation, pointing to situations of balance that denote possibilities of ambidexterity postures of the studied craft breweries.

4.3

Ambidexterity practices in craft breweries

From the practices of exploration and exploitation, it was possible to identify situations of ambidexterity (Koriak et al., 2018), which suggest the capacity of the studied organizations to improve and perfect routines and processes and, at the same time, to adapt to changes from the creation of new practices arising from the emergence of new opportunities (Raisch & Birkinshaw, 2008). These practices are elucidated from the interviewees’ narratives and contextualized within each studied craft brewery (Figure 4.3.1).

Figure 4.3.1
AMBIDEXTERITY IN CRAFT BREWERIES

In specific terms, the interviewees’ narratives, properly contextualized within the scope of each studied craft brewery, reveal the configuration of ambidexterity practices based on a balance between exploration and exploitation initiatives (Chen, 2017; Gupta et al., 2006; Koriak et al., 2018; Luger et al., 2018; Moss et al., 2014). Among these practices, it is possible to highlight aspects such as the foundation of the studied breweries, actions aimed at consolidating these companies in the market, the definitions and redefinitions of their business models, the creation of new types and styles of beer, improvements in terms of increase in production capacity, product quality, consumer satisfaction, market share, customer loyalty, and the adoption of new technologies, among other situations.

Thus, the importance of the balance between exploration and exploitation is reinforced through different radical and incremental innovations that are consistent with and contribute to the configuration of organizational ambidexterity (Andriopoulos & Lewis, 2009; Gibson & Birkinshaw, 2004; Raisch & Birkinshaw, 2008; Severgnini et al., 2019). Ambidexterity is based on the manifestation of elements that establish and demonstrate the balance between exploration and exploitation actions, such as the creation of the brewery combined with the delimitation and refinement of the business model, the increase in market share coupled with improvements in terms of quality and production and commercialization processes, the creation of new products combined with the search for improvements in production and productivity, among other possibilities. Therefore, through the analysis of the collected data, it was possible to carry out a synthesis of the practices identified that refer to the dimensions of exploration, exploitation, and ambidexterity, which underlie the bases of strategic entrepreneurship (Hitt et al., 2011; Kuratko & Audretsch, 2009; Mazzei, 2018; Mazzei et al., 2017).

The purpose of this article was to understand the configuration of strategic entrepreneurship practices of exploration, exploitation, and ambidexterity in craft breweries in Uberlândia-MG. In order to accomplish this, a qualitative case study was carried out with three organizations that produce craft beers, seeking to ascertain, in the narratives of the interviewed agents, entrepreneurial decisions and actions that could later be categorized and reinterpreted under the perspective of strategic entrepreneurship.

Specifically, the concept of strategic entrepreneurship provided a conceptual framework that enabled the apprehension of the practices for identifying and exploring business opportunities, the creation practices of the studied companies, and the practices of building innovative processes at the organizational and market levels. This set of practices was analyzed and discussed in the light of the theoretical framework built, thus enabling its consideration from the dimensions of exploration and exploitation.

Brewery A stands out in terms of exploration, given the company’s pioneering spirit in the Uberlândia market and in the Triângulo Mineiro region, as well as brewery C, which launched the brewpub business model (manufacture and consumption in the same place). In parallel, it appears that exploitation initiatives were developed in all of the cases studied, given that the craft beer industry is conditioned to the introduction of constant and continuous modifications and improvements in products, services, processes, and production and marketing strategies.

Based on this movement, there was an initial balance between explo­ration and exploitation actions, which reflects the configuration of organizational ambidexterity. In fact, the manifestation of ambidextrous behavior in breweries contributed to the development of their internal activities and also to the formation of specific differentials in their industry from a local and regional perspective. This context became evident as elements such as the identification of opportunities for improvement in production processes, adaptations of new techniques, instruments, and production equipment collaborated to create new recipes, to adapt beer types to the local market, to the creation of new forms of commercialization, among other practices.

Therefore, it is concluded that the manifestation of strategic entrepreneurship allowed to highlight the capacity that the studied craft breweries have to deal with the different possibilities in terms of exploration, exploitation, and ambidexterity. Indeed, the practices associated with these dimensions reflected in different practices that can be equally linked to the construction of processes of radical and incremental innovation, which has a decisive impact on the competitiveness of the studied companies in their development, from the organizational point of view, and in their prospects for survival in the market. This reveals the strength of the notion of strategic entrepreneurship for the study of the entrepreneurial phenomenon.

It should be noted that the present article has some limitations. There was a methodological choice due to the restriction of access to the field and the research focus on craft breweries in the city of Uberlândia. Thus, future studies could investigate the business reality of different locations and/or regions to ascertain similarities and differences in terms of entrepreneurship and innovation in this industry. In addition, it was decided to delimit the cases to be studied through a section of those objects considered most suitable for carrying out the study. In this sense, future investigations could focus on expanding the number of cases to be analyzed, as well as resorting to quantitative methodologies and/or perspectives of method triangulation to obtain greater breadth and scope of the research findings.

Nevertheless, it is believed that, despite such limitations, the article presents some contributions. A practical implication of this study is the possibility of highlighting the relevance of innovation and ambidextrous behavior for the processes of change and organizational transformation experienced in the daily lives of the studied breweries, given their strategic impact. Based on this scenario, it is even possible to establish means to encourage the execution of decisions and actions aimed at exploring new opportunities and exploiting existing products and processes to build an innovative dynamic capacity for craft breweries. With this, it is believed that this study adds to the literature and contributes by shedding light on the manifestation of strategic entrepreneurship in the context of craft breweries, highlighting the potential that the apprehension of innovation and strategic renewal processes assume for the understanding of the context of the studied companies, which can also be extrapolated to understand and explain the reality experienced by other breweries in this market.

From a scientific point of view, the present article is relevant when exploring the notion of strategic entrepreneurship, a theme that has been relatively little explored in Brazilian studies on the entrepreneurial phe­nomenon and which has gained prominence in an international perspective in the fields of studies on entrepreneurship and innovation, especially from the concepts of exploration, exploitation, and ambidexterity. Furthermore, this study contributes by applying the concept of strategic entrepreneur­- ship to the context of craft breweries, a specific type of organization that belongs to a relatively emerging industry and is still little explored in the broader plan of research in management and entrepreneurship.