How corporate development activities resolve the legitimacy-adaptation dilemma: A case study in technological substitution

Technological substitution (TS) requires firms to employ corporate development activities (CDAs) to survive. However, how firms employ CDAs is constrained by their financial market identity wherein investors classify firms as value- or growth-oriented. This results in a dilemma for value and growth firms due to opposing mandates of legitimation (alignment with identity) and adaptation (surviving TS). How can firms resolve this dilemma? I theorize that firms resolve the dilemma by modifying the degrees of exploration and exploitation in their CDAs. For value firms, the likelihood of survival increased by 51% and 32% on increasing the degree of exploration in alliances and acquisitions. For growth firms, the likelihood increased by 39% and 60% on increasing the degree of exploitation in internal development and acquisitions. This study contributes to the literatures on investor reactions to firm strategies during TS, CDAs, and ambidexterity. It presents implications for industrial and innovation policy during TS.