Avoiding the Downturn? How Ambidexterity and Public Policy influence Firm Performance Stability during Economic Crisis

A key question confronting managers during economic crisis is how their firms can remain stable while others experience downturns. To address this question, the present study uses non-linear modeling to examine how firm-internal responses (i.e., ambidexterity) and external public policy responses (i.e., demand-pull policies) affect the stability of firms’ performance in a recessionary economic context. Using survey data from German renewable energy firms and archival measures of firm performance stability, we find that ambidexterity has a U-shaped effect on performance stability. Conversely, demand-pull policies do not seem to have a significant effect on performance stability on their own. However, we find that firms with low levels of ambidexterity do benefit from demand-pull policies. These findings allow several contributions to the ambidexterity and public policy literatures and to the broader question of how firms and policy makers can tackle economic crisis.