Incumbent entry into new market niches: The role of experience and managerial choice in the creation of dynamic capabilities

Incumbent entry into new market niches: The role of experience and managerial choice in the creation of dynamic capabilities

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Article ID: iaor20032190
Country: United States
Volume: 48
Issue: 2
Start Page Number: 171
End Page Number: 186
Publication Date: Feb 2002
Journal: Management Science
Authors: ,
Abstract:

Increasingly, technological innovation creates markets for new products and services. To survive, firms must respond to these new markets. How do firms develop the capabilities necessary to succeed in such changing conditions? Some suggest that experience with previous entry builds such capabilities. Others suggest that capabilities arise from experience producing and selling to existing markets. The role of managers is also debated. Some argue that experience with existing markets causes managers to miss entry opportunities. Others argue that managers enter new markets when their firm possesses the experience needed to compete effectively. In this paper, we explore these issues by investigating entry patterns in disk-drive industry. We investigate the effect of experience in existing markets and experience with previous market entry. We find that experience in previous markets increased the probability that a firm would enter a new market. We show that this experience had greater value if the firm entered the new market. We infer that managers chose to enter these markets to obtain this increase in value.

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