Expansive or Focused Attention? An Exploration Exploitation Perspective on E‐Business Systems and Firm Performance

This study posits that executive attention can significantly influence the impacts of customer-facing electronic business (e-Business) systems on firm performance. Using the exploration–exploitation perspective (EEP) as an overarching theoretical framework, and the theoretical lens of attention-based view (ABV), we develop an integrated model to provide insights into the impacts of customer-facing e-Business systems on firm performance. We categorize the capabilities of customer-facing e-Business systems into e-Transaction and e-CRM (customer relationship management) capabilities as exploitation and exploration capabilities, respectively. Further, following ABV, we conceptualize focused and expansive attentions as two different types of executive attention that also incorporate exploitation and exploration orientations. We hypothesize e-Transaction and e-CRM capabilities to have nuanced interactive effects with focused and expansive attention on firm performance measured using return on sales and Tobin's Q. We use a panel dataset with 484 firm-year observations from 180 firms to test our hypotheses. We estimate our models using a two-step generalized method of moments (GMM) approach to address issues relating to endogeneity, heteroskedasticity, and serial correlation, and to produce efficient estimates. The results provide broad support for the hypotheses and are robust to the alternative measurement of dependent variables, alternative econometric model specification, and potential endogeneity from omitted covariates. The integrated model developed and empirically validated in this study serves to provide a deeper understanding of the impacts of customer-facing e-Business systems on firm performance. The study also highlights the need for dual attention processes on the part of senior executives to fully realize the benefits offered by these systems.