Ambidexterity as a Mediating Variable in the Relationship between Dynamism in the Environment,Organizational Context and Strategic Renewal

Abstract

This article attempts to highlight the significance of the mediating role of contextual ambidexterity that leads to strategic renewal in organizations. The antecedents to renewal such as the context pertaining to an organization, nature of dynamism in the environment, and ambidexterity have been examined through a predicted relationship to suggest that these specific variables lead to strategic renewal. An empirical study conducted across 11 firms highlights the relationship between these four variables. The findings of the research study suggest that contextual ambidexterity significantly mediates the relationship between dynamism in the environment, organization context, and renewal.

Keywords

Strategic renewal context dynamism in the environment contextual ambidexterity

Introduction

Strategic renewal in organizations is an issue which has found relatively less importance in the management literature. Studies in strategic renewal have exhibited how the process, content, and outcome of replacement or refreshment of attributes contribute toward renewal (Agarwal & Helfat, 2009; Fuller & Volberda, 1997). Similarly ambidexterity has been widely studied in terms of both contextual and structural aspects and in terms of how firms go about building ambidexterity in organizations (Duncan, 1976; Gibson & Birkinshaw, 2004; He & Wong, 2004; March, 1991; O’Reilly & Tushman, 2004; Raisch & Birkinshaw, 2008; Tushman & O’Reilly, 1996). Furthermore, it has been reported through empirical research that the development of appropriate organizational context shapes or facilitates ambidexterity in organizations (Gibson & Birkinshaw, 2004; Raisch & Birkinshaw, 2008). Whether it also leads to renewal has remained largely unexplored. The collective influence of the context pertaining to an organization and the nature of dynamism in the environment in shaping ambidexterity which can drive renewal has also remained unexplored (Jansen et al., 2006). As such what are the antecedents to strategic renewal in organizations? Do any of these antecedents have a mediating effect? This research study attempts to examine the interrelationship between the four variables and in particular to understand the role of ambidexterity as a mediator in facilitating renewal.

Research Studies

The nature of dynamism in the environment as an influence in shaping ambidexterity, in particular, has not received much attention (Gibson & Birkinshaw, 2004). The current study examines a construct to establish the relationship between context, dynamism in the environment, ambidexterity, and strategic renewal, as shown in Figure 1. It attempts to examine the effect of the antecedents (context and dynamism in the environment) to create ambidexterity in organizations to possibly facilitate renewal.

Firm performance is assisted by the development of ambidexterity (Lubatkin, Simsek, Ling, & Veiga, 2006; Raisch, Birkinshaw, Probst, & Tushman, 2009). However, the role of ambidexterity in enabling firms to achieve renewal has remained largely unexplored.

Figure 1.

Relationships Predicted

Independent variable. Organizational context and environmental dynamism are taken to be the independent variables and explored in detail to illustrate that appropriate organizational context and environment facilitate ambidexterity which then leads to renewal.

Dependent variable. For the current research study, renewal is assumed and predicted to be the dependent variable which is caused by developing appropriate organizational contexts and environment through an intermediate effect of ambidexterity.

Mediating variable. The mediating variable considered for this research is ambidexterity. It is argued in the article that the route of arriving at the dependent variable from the independent variable can be realized through the mediating variable.

Strategic Renewal

Many a time strategic renewal is understood to be a strategic change and hence both these terms are used loosely. On a more general note, strategic renewal is frequently used to explain examples of a strategic change with most examples highlighting the process of change; however, strategic renewal has something more than the process of change. There are important content aspects as well (Fuller & Volberda, 1997).

Renewal

The term “renew” is understood to be “to make like new” (e.g., Merriam-Webster Online Dictionary, 2013). Synonyms include “to refresh” or “to revitalize” by restoring strength or animation. In its broadest definition, change means to make or become different. Thus, change can be understood as refreshing or replacing any attributes, but need not create renewal. For example, change can be referred to understand any extensions of products or services or for that matter any form of adding or removing an element can be referred to as change without renewal (Agarwal & Helfat, 2009). Renewal is then one type of change, indicating all forms of renewal are changes but not all changes are renewal in nature.

Defining Strategic Renewal

Any act of refreshment or replacement of attributes such as the process, content or outcome that has significant outcome on a firm’s long-term prospects is understood to be strategic renewal (Agarwal & Helfat, 2009). The same authors clearly mention that either refreshment or replacement of attributes or a combination of the same constitutes strategic renewal. There are two basic types of strategic renewal: (i) discontinuous and (ii) continual or incremental renewal.

Discontinuous Transformations

Of late, majority of the research studies have focused their attention on analyses of discontinuous transformations. Major changes such as a new technology that makes the existing technology obsolete or shifting demands of customers may cause a firm to drastically alter one or more aspects of how it handles customer orientation and management of the organization which are basically discontinuous transformations (Adner, 2002; Agarwal et al., 2004). Discontinuous transformations address the replacement of important parts of a company and its strategy that affects its long-term prospects. Thus, major changes in organizations that involve change along multiple dimensions, such as business model changes, changes due to obsolescence in old technologies, organizational structural mechanisms, resources, routines, capabilities, etc. entail strategic renewal (Floyd & Lane, 2000; Tripsas, 2008).

Continual (Incremental) Transformations

As major transformations/changes often pose great difficulties, many companies find it very hard to effect such major changes and instead find ways to continuously renew themselves periodically in an incremental manner either to keep pace or even to lead external environment changes happening (Rothaermel & Hess, 2007). This method of managing transformations has not found adequate importance in the literature, though few authors have touched upon it (Gibson & Birkinshaw, 2004; O’Reilly & Tushman, 2004). The focus on continual transformations is on how to build new businesses while operating matured businesses. These are typically incremental strategic renewal efforts.

Organizational Ambidexterity

A proper analysis of organization theory would suggest that organizational ambidexterity is a relatively new research stream. The few studies that have so far dominated literature and theory building would suggest that ambidexterity through the structural route is available, which in turn tries to explain issues relating to exploitation and exploration (O’Reilly & Tushman, 2004) that can influence firm performance. Of late, some conceptual work has been followed up with empirical studies to suggest the positive influence of structural ambidexterity on firm performance. Multidimensional studies on ambidexterity emphasize on (i) ambidexterity’s positive influence on firm performance (Gibson & Birkinshaw, 2004; He & Young, 2004; Lubatkin et al., 2006), (ii) extensions to studies on ambidexterity have new insights on the contextual antecedents (Gibson & Birkinshaw, 2004), (iii) how informal networks can drive ambidexterity in organizations (Gulati & Puranam, 2009) and also how leaders create management processes to drive ambidexterity (Lubatkin et al., 2006; Smith & Tushman, 2005), and (iv) ambidexterity and its interrelationships with the antecedents and performance (O’Reilly & Tushman, 2008; Raisch & Birkinshaw, 2008). Raisch et al. (2009) have addressed the issue of ambidexterity and have likened it to the ability to handle the conflicting tensions in issues like ambidexterity through an internal or external perspective.

This study uses the concepts of contextual ambidexterity as discussed by Gibson and Birkinshaw (2004). Alignment and adaptability are key features of contextual ambidexterity. Alignment can be defined in terms of the ability of multiple business units in organizations to work together, thereby having a synergistic effect to achieve wider organizational goals. Similarly, adaptability is the ability of a business unit to quickly adjust activities in order to meet to the ever changing demands in the task environment (Adler, Goldoftas, & Levine, 1999; Denison, 1990). Unlike structural ambidexterity which is typically developed through “dual structural arrangements,” ambidexterity through the contextual route is achieved by developing systems, processes, and norms that gives members a feeling of empowerment.

The Route of Contextual Ambidexterity

The ability to simultaneously juggle between two contrasting work activities is primarily understood to be ambidextrous. Thus, exemplifications of ambidexterity in organizations can mean the pursuit of both flexible manufacturing and manufacturing efficiency (Adler et al., 1999). Similarly, Porter’s (1980, 1996) views on how organizations can go for the simultaneous pursuit of key strategic objectives like differentiation and low-cost positioning can also be understood to be a characteristic feature of ambidexterity. Bartlett and Ghoshal (1989) also discussed the simultaneous experimentation on global integration and local responsiveness. Tushman and O’Reilly (1996) viewed ambidexterity as the ability of a firm to simultaneously demonstrate both continual and discontinuous innovation and change. Thus, the concept of ambidexterity in organizations is not new. As noted by Duncan (1976), initial thoughts on ambidexterity were through the lens of dual structural arrangements for managing innovation. Creating the needed balance between conflicting demands for exploitation and exploration was put forward initially by March (1991).

The emergence of contextual ambidexterity arises from two elements: alignment and adaptability. The manifestations of the characteristic features of contextual ambidexterity can be attributed to the work behavior of many employees. Thus, appropriate contexts within organizations are created so that the systems and work practices embedded within the context helps in nurturing ambidexterity in the behavior of individuals. As a result, it helps members when to make the switch between improving firm performance in the short term (alignment) and creating value for the long term (adaptability). Gibson and Birkinshaw (2004) further mention that developing ambidexterity through the contextual route depends on the balance between dual capacities of alignment and adaptability. Similar views have been argued wherein the contextual approach has tendencies to transcend, even when alignment and adaptability are complementary in nature and interwoven (Lewis, 2000; Schneider, 1990). Developing twin abilities simultaneously as suggested by March (1991) influences the long-term success of organizations.

Based on the above viewpoints, it is worthwhile to mention the links that exist between environmental dynamism and ambidexterity in organizations. As explained earlier, there is a possibility that high levels of ambidexterity demonstrated by firms primarily can be attributed to the nature of dynamism of the environment faced by the firm—this critical aspect needs further study. Accordingly, this ability of creating contextual ambidexterity through alignment and adaptability is the basis on which organizations can create renewal by refreshing or replacing some or all of its attributes. Thus, the first hypothesis is:

Hypothesis 1. The higher the levels of ambidexterity demonstrated, the higher the inherent need of organizations for strategic renewal.

Organizational Context

The framework for organizational effectiveness as propounded by Ghoshal and Bartlett (1994) suggests that effective efforts at renewal and revitalization can be made when leaders in a business unit create a suitable behavioral context. Gibson and Birkinshaw (2004) further refer the organization context to encompass the behavioral concept wherein the context created through the beliefs, values, and systems within business units of organizations can collectively shape individual-level behaviors in any organization. Ghoshal and Bartlett’s (1994) framework referred to the development of a behavioral context through four interdependent behavior framing attributes of discipline, stretch, support, and trust. An organizational context shaped by self-discipline in management processes and performance management does not expect authority-driven relationships as a means for influencing individual behavior; rather the self-discipline that already exists in management systems strive employees to voluntarily meet the requirements and expectations of the system. Similarly, a feeling of stretch is an attribute of context which induces members to strive for more as also give their best in terms of performance. In self-renewing organizations, top management creates stretch by putting in systems in the internal work environment that raise the aspiration levels of individuals and encourage people to give their best through an overarching shared vision. Support signifies more of the horizontal linkages that exist among fellow members rather than the mechanistic vertical relationships that exist in most organizations. Thus, the freedom of initiative at functional levels for accessing resources to take informed decisions through a collaborative culture can create real supporting mechanisms. The last but the most profound of the attributes, which is trust, signifies the dependability on team members to honor the commitments already made.

The four key attributes of behavioral context have been further synthesized by Birkinshaw and Gibson (2004), wherein they concluded that the attributes of stretch and discipline basically constitute effective measures of performance in organizations. The attributes of support and trust address the issue of social support that exists in organizations. Thus, the combination of performance management and social support addresses the context that exists in organizations. For this research, the questionnaire and the methodology used by the mentioned authors in defining organizational context for arriving at indices have been used.

Environmental Dynamism

Any instability or rate of change in the environment is referred to as environmental dynamism. Thus, depending upon the rate of change happening in the environment, an organization tries to classify itself being present in dynamic or relatively static environments. Changes in various market elements such as changes in preferences of customers, a disruptive technology, and increasing intensity of competition can be understood to be a case of dynamic environment faced by an organization. As mentioned by Ansoff (1979), turbulence and volatility have similarities in terms of dynamism and have a related degree of novelty in their changes or to their speed. In a highly dynamic environment, firms face frequent changes in customer’s preferences, or the possibility of an existing technology getting outdated. Thus, firms require continuous upgradation and continuous refining of their products and services. Many environmental changes render current offerings of firms to be obsolete and continuously require the development of newer products and services (Jansen, Vaen Den Bosch, & Volberda, 2006; Sorensen & Stuart, 2000). Similarly, a firm’s existing knowledge can be made redundant if abrupt and unpredictable changes happen (Hitt, Ireland, & Lee, 2000). On a similar note, if there are rapid changes in the external environment, a firm’s product development capability gets hampered (Iansity, 1995).Thus, firms need to acquire and refine capabilities on a continual basis to avoid obsolescence. As a contrast in markets that are less dynamic in nature, modifications in offerings are less required, as customer preferences do not change that fast. Firms which face moderate to low stability in environmental dynamism respond to changes relatively late compared to firms that face volatile environments (Zahra, 1996; Zahra & Bogner, 1999).

As mentioned by Duncan (1972), complexity has to do with the degrees of proliferation and diversity of factors in the environment. Thus, more complexity can arise because of more number of elements as also due to more difference among elements. Fuentes-Fuentes, Albacete-Saez, and Lloréns-Montes (2004) mention that the nature of knowledge management capability in organizations has a direct correlation with the nature of complexity in the environment. Research studies have focused on the larger role of the external environment that helps organizations to sense and seize opportunities as mentioned by Teece, Pisano, and Shuen (1997). Other researchers have tried to explain the role of environmental uncertainty and complexity in the relationship between dynamic capabilities and how a firm develops sustainable competitive advantage. However, studies directly linking the nature of dynamism in the environment and ambidexterity are relatively rare in the literature as many studies consider environment as a boundary condition (Gibson & Birkinshaw, 2004; Raisch et al., 2009).

Hypothesis 2. The higher the appropriateness of organizational context and suitability of the environment influences, the higher the level of ambidexterity.

Hypothesis 3. The higher the appropriateness of organizational context and suitability of the business influences, the higher is the level of renewal.

The argument that follows is that ambidexterity mediates the relationship between environmental dynamism, context, and renewal. That is, the attributes of environment and appropriate context facilitate a buildup of ambidexterity which then drives the organization to renewal. When context in an organization is yet to be developed, the environmental influences may or may not affect ambidexterity and renewal.

Hypothesis 4. Contextual ambidexterity mediates the relationship between the antecedents (context and environment) and the consequence (renewal).

Objectives of the Study

Based on the hypotheses framed, this study examines the following questions:

How does ambidexterity facilitate renewal in organizations?

How do the separate and combined effects of context pertaining to an organization and nature of dynamism in the environment shape ambidexterity in organizations?

What type of role does ambidexterity play in the predicted relationship? (Is it a mediating or a moderating role?).

Methods

This study examined 11 established firms in India across diverse sectors (telecom, textile machinery, cement, metallurgy, information technology, infrastructure, venture finance, network technology, engineering consulting, energy, and financial services). A questionnaire was administered to survey the context pertaining to an organization, the nature of dynamism in the environment, the contextual ambidexterity and strategic renewal exhibited. Correlations were used to examine the nature of the relationship between the mentioned variables. This was followed up with linear regression to find the strength of the relationship.

Established firms. Firms that are more than five years old or have more than 100 employees or are publicly listed. A combination of all of the three above or any two would also qualify for an established firm.

Frame of reference. Firms which complied with the criteria set for an established firm were further subjected to the following next level criteria as a prequalification for taking the survey (O’Reilly & Tushman, 2004).

Firm’s interest in promoting organizational separation and promoting subcultures within the same firm.

How does the firm develop characteristics of alignment versus adaptability?

In what ways does the firm promote entrepreneurship?

The mechanisms by which the firm is able to sense and seize opportunities.

How does the firm leverage existing competencies to build new businesses?

How does the firm demonstrate capabilities of competing in mature and new markets?

Initially, 16 firms were taken up for consideration. However, five firms did not fulfill the prequalification criteria. The 11 firms which fulfilled at least four of these prequalification criteria as a benchmark were covered in the survey as mentioned in Table 1.

Levels of Employees Considered for Administering Questionnaire

In a pilot study of two organizations prior to the administration of the questionnaire amongst the 11 organizations, it was found that lower-level or operational-level people had few clues on the nature of the questions posed. To avoid such sample errors, only the senior- and middle-level employees were targeted in the survey.

Table 1.

Firm Characteristics for Prequalification

Firm (Industry)	Criteria for Selection in Survey					Total of Positive Attributes	Turnover (` in Crores)	No. of Employees
Criteria	i	ii	iii	iv	v	Total of Positive Attributes	Turnover (` in Crores)	No. of Employees	vi
A (Infrastructure)	No	Yes	Yes	Yes	Yes	Yes	5	4,000	400
B (Engineering Consulting)	Yes	Yes	No	Yes	Yes	Yes	5	600	150
C (Financial Services)	No	No	Yes	Yes	Yes	Yes	4	200	60
D (Energy)	Yes	Yes	Yes	Yes	No	No	4	6,000	600
E (Information Technology)	Yes	Yes	Yes	Yes	Yes	Yes	6	3,000	200
F (Textile Machinery)	No	Yes	Yes	Yes	Yes	Yes	5	1,200	650
G (Venture Finance)	Yes	Yes	Yes	Yes	Yes	No	5	600	80
H (Metallurgy)	No	Yes	Yes	No	Yes	Yes	4	1,500	450
I (Telecom)	No	Yes	Yes	Yes	Yes	Yes	5	3,000	200
J (Network Technology)	Yes	Yes	Yes	Yes	Yes	Yes	6	400	60
K (Cement)	No	Yes	Yes	No	Yes	Yes	4	2,000	800

Table 2.

Sample Firm Characteristics

Sr. No.	Management Levels		Total Respondents in the Survey	Industry Coverage
Sr. No.	Middle	Senior	Total Respondents in the Survey	Industry Coverage
1	19	04	23	Cement
2	17	03	20	Textile Machinery
3	17	02	19	Venture Finance
4	26	05	31	Metallurgy
5	10	02	12	Telecom
6	07	02	09	Network Technology
7	10	02	12	Financial Services
8	16	04	20	Information Technology
9	17	05	22	Power
10	17	03	20	Engineering Consulting
11	30	04	34	Infrastructure
Total	186	36	222

Procedures and Sample

A structured questionnaire containing the key elements of context, contextual ambidexterity, dynamism in the environment, and renewal was administered. A total number of 222 valid respondents were considered for analysis. Refer Table 2 for sample firm characteristics.

Measures

All the construct variables mentioned were measured with multi-item scales—7-point Likert scale.

Renewal

On matters of renewal (dependent variable), the questionnaire administered required the reflection of various degrees of discontinuous and continual renewal. The reliability scale for renewal was found to be 0.805.

Contextual Ambidexterity

As both alignment and adaptability have different connotations, different scales were used to measure the same. The overall internal reliability of the contextual ambidexterity scale was 0.569.

Table 3.

Indicator Construct Variables and Values of Scale Reliability

Sr. No.	Measure	Construct and Indicator Variables	Cronbach’s Alpha
1.	OC_PER	Performance Management	0.794
2.	OC_SOC	Social Support	0.821
3.	OC	Organizational Context	0.872
4.	ENV_DYN	Environmental Dynamism	0.825
5.	AMB_ALI	Alignment	0.342
6.	AMB_ADA	Adaptability	0.726
7.	AMB	Ambidexterity	0.569
8.	REN	Renewal	0.805

Environmental Dynamism

Typical questions raised were in terms of how stable environmental influences look for a company and the nature of complexity in the environment that a company faced. The overall consistency of the scale used was found to be 0.825.

The Context Pertaining to the Organization

Questions in the questionnaire were on two areas—namely performance management and social support (Birkinshaw & Gibson, 2004). On attributes of performance management, the scale used had the internal reliability of 0.794. The internal reliability of the social support scale was found to be 0.821. The product of the average scores of performance management and social support gives the score for the overall context of the organization (Birkinshaw & Gibson, 2004). The overall internal reliability values of organizational context were found to be 0.872.

The Descriptive Statistics for the Studied Variables

The skewness and Kurtosis (refer Table 4) were measured as the first measure of normality. Also, the multivariate normality check using the Kolmogorov–Smirnov test was done to confirm the normality of the data (Lilliefors correction). The result suggests that data used were well under the normality limit.

Analysis

Based on the significance of correlation coefficients (see Table 5), the interrelationship between the variables in the construct (Figure 1) exists as per prediction.

Table 4.

Test Results of Normality

N	Valid	OC-PERF	OC-SOC	OC	ENV__DYN	AMB_ ALI	AMB-ADA	AMB	REN
	Valid	222	222	222	222	222	222	222	222
	Missing	22	22	22	22	22	22	22	22
Skewness	–0.435	–0.404	–0.086	–0.611	–0.022	–0.604	0.625	–0.410
Std. Error	0.163	0.163	0.163	0.163	0.163	0.163	0.163	0.163
Kurtosis	0.182	0.124	–0.268	1.413	–0.279	0.289	0.388	–0.223
Std. Error	0.325	0.325	0.325	0.325	0.325	0.325	0.325	0.325

Table 5.

Correlations among the Variables

		1	2	3	4	5	6	7	8
1	OC_PER	(0.794)
2	OC_SOC	0.631*	(0.821)
3	OC	0.889**	0.903**	(0.872)
4	ENV_DYN	0.501**	0.466**	0.527**	(0.825)
5	AMB_ALI	–0.006	–0.032	–0.26	–0.014	(0.342)
6	AMB_ADA	0.396**	0.412**	0.461**	0.356**	0.213**	(0.726)
7	AMB	0.234**	0.226**	0.258**	0.188**	0.802**	0.737**	(0.569)
8	REN	0.511**	0.480**	0.558**	0.477**	0.040	0.533**	0.337**	(0.805)

Notes: Cronbach’s alpha values in the parenthesis along the diagonal.

*Correlation is significant at the 0.05 level (2-tailed).

**Correlation is significant at the 0.01 level (2-tailed).

Individually, both performance management and social support and collectively their combination (organizational context) were significantly and positively related with renewal. Thus, the results provide support for the context of an organization to be positively correlated with renewal.

The possibility of any systematic errors arising was tested through a common method bias (Podsakoff et al., 2007). The scale items were examined for potential common method variance using Harman’s one-factor test. The exploratory factor analysis results in seven factors explaining 60.482 percent of the variance. Furthermore, if only one factor were to be derived, the single factor would support only 29.127 percent of the variance. Thus, the above test indicates less evidence of the common method bias in the current study, and further analysis of the predicted construct can be made.

Hypothesis Testing

The hypothesis testing was done by linear regression. The values supporting the hypotheses are mentioned in Table 6.

Table 6.

Results of the OLS Regression

Model No.	Parameter	Coefficient	Standard Error	P-Value	Results of the Hypothesis Test
1	Dependent: REN				H1: Supported
	Intercept	0.574	0.027	0.0005
	AMB	0.305	0.057	0.0005
2	Dependent: AMB				H2: Supported
	Intercept	0.335	0.042	0.0005
	OC	0.360	0.054	0.0005
	ENV_DYN	0.273	0.069	0.0005
3	Dependent: REN				H3: Supported
	Intercept	0.335	0.042	0.0005
	OC	0.360	0.054	0.0005
	ENV_DYN	0.273	0.069	0.0005
4	Dependent: REN				H4: Supported
	Intercept	0.285	0.043	0.0005
	AMB	0.175	0.050	0.001
	OC (Controlled)	0.324	0.054	0.0005
	ENV_DYN (Controlled)	0.258	0.067	0.0005

Testing the Mediating Effect

Based on the predicted relationship, through Hypothesis 4 we propose that ambidexterity as a variable will have an intermediate or intervening effect on understanding renewal. The analysis of the mediation effect is a three-step exercise (Baron & Kenny, 1986).

The study establishes that the independent variable (here context and dynamism in the environment) influences the mediating variable (ambidexterity). This statement is supported in Model 2 of Table 6.

The study establishes that the independent variable (context and dynamism in the environment) influences the dependent variable (renewal). This statement is supported in Model 3 of Table 6.

Lastly, the study highlights the impact of the mediating variable on the dependent variable (renewal), with the independent variables controlled. If the effect of context and environmental dynamism is no longer significant when ambidexterity (mediator) is in the model, full mediation can be inferred (Baron & Kenny, 1986). As shown in Model 4 of Table 6, the coefficient of ambidexterity was positive and significant indicating intervening effect of ambidexterity on renewal. Furthermore, when all the variables are considered simultaneously to explain effects on renewal, the coefficient for context and dynamism in the environment is not significant. Both the coefficient and the corresponding test statistic for significant difference (t) decreased from Model 3 to Model 4 (refer Table 7).

Table 7.

Test Statistic for Significant Differences

Parameters	Model 3		Model 4
Parameters	Values of Coefficient	Value of t	Values of Coefficient	Value of t
OC	0.360	6.671	0.324	6.044
ENV_DYN	0.273	3.958	0.258	3.828

Table 7 demonstrates the significance of ambidexterity as a mediating effect on renewal.

The Mediating Effect: Statistical Significance

Mediation can be explained if the proposed outcome has a reduction effect from the initial variation. The statistical significance of the mediated effect was tested by finding the test statistic (also called the Z-score) using the Sobel test (ab/sqrt (a²s_b² + b²s_a² + s_a² s_b²), wherein the values of test statistic were 1.689, p = 0.0091. (When using the Sobel error term, the 0.05 critical value is ±0.97, that is, if the absolute value of the test statistic is 0.97 or more, then the mediation effect is significant.).

The results obtained offer a suggestion of significant mediation. Thus, it can be concluded that ambidexterity has a mediating effect on the antecedent variables (context and dynamism in the environment) and dependent variable (renewal).

Conclusion

This study has important implications for both theory and practice of management. Majority of the research studies available in the literature report that promoting ambidexterity leads to improvement in firm performance; however, the renewal aspect is not touched upon. The research findings through this study suggest that creating ambidexterity sets the tone for renewal in organizations. The higher the contextual ambidexterity demonstrated in organizations, the higher the potential for strategic renewal. Similarly, the effects of context pertaining to an organization and the nature of dynamism in the environment in facilitating ambidexterity are positive. This suggests that organizations should have a proper and structured way of highlighting various influences in the environment to derive success from ambidexterity exercises. Furthermore, the combined effect of the independent variable (context and dynamism in the environment) and the mediating variable (contextual ambidexterity) on the dependent variable (renewal) is also significant and positive, suggesting all three are antecedent variables. The mediating effect of ambidexterity suggests that ambidexterity influences the renewal output. Thus, organizations need to build ambidexterity through appropriate organizational contexts, meeting the requirements of the environment to lead to superior renewal efforts. At this stage, it is worthwhile to mention that many studies of ambidexterity have considered environment as a boundary condition. However, this study has found strong evidence that for ambidexterity or renewal to be achieved, auditing the various environmental influences is very important and hence firms should understand the nature of these changes in a significant way before attempting to create a context for successful strategic renewal. The results of this research study suggest that ambidexterity can be achieved through appropriate organizational context which can then drive superior renewal efforts, and that ambidexterity has a significant mediating influence in facilitating renewal in organizations.

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