Incumbent Entry into New Market Niches: The Role of Experience and Managerial Choice in the Creation of Dynamic Capabilities

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 the 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.Disk Drives, Dynamic Capabilities, Niche Innovation, Market Entry, Organizational Inertia, Experience

Explicating the dynamics of project capabilities

“…Some evolutionary scholars suggest that dynamic capabilities depend on specific cognitive processes called 'metaroutines' to identify, challenge and modify lower-order routines that are no longer achieving desired performance targets (Amburgey, Kelly, and Barnett, 1993;Adler, Goldoftas, and Levine, 1999;Knott 2001, King andTucci 2002;Wezel, Cattani, and Pennings, 2006). Exercising a metaroutine involves time for reflection, learning from feedback and managerial discretion to know when to modify routines to keep pace with changing environment and when to enforce them when conditions are stable and predictable (Wezel et al, 2006).…”

The Penguin Has Entered the Building: The Commercialization of Open Source Software Products

“…Our premise is that preexisting assets affect the direction as well as the pace of change and adaptation of a firm (Tripsas 1997, King andTucci 2002). Compared with proprietary software, OSS entails important differences in the way products are developed.…”

“…The other essential element of our analysis is the sensible reduction of the level of protection of the core product, which forces firms to secure the control of other, possibly complementary, resources to benefit from their commercialization efforts (Teece 1986). Several scholars point out how preexisting assets, when protected and difficult to imitate, drive a firm's initial competitive position and affect its ability to adapt and exploit new opportunities (Tripsas 1997, King andTucci 2002). Protected assets can be considered nonsubstitutable and costly to imitate resources (Barney 1991), meaning that variations in such protected assets could explain a large part of the differences in OSS commercialization strategies across firms.…”

Measuring the competitiveness of Latvian companies

“…Previous studies have proved that a higher education level (e.g. Bantel & Jackson, 1989;Hambrick & Mason, 1984) and greater business experience of the owner-managers (King & Tucci, 2002) have a significant positive influence on the companies' performance indicators and their overall competitiveness (e.g. Davidsson, 2006;Gimeno, Folta, Cooper, & Woo, 1997).…”

“…Previous entrepreneurship studies also indicate that in addition to workforce efficiency, the education level of the company owner-managers plays a crucial role in ensuring business competitiveness (Alvarez & Busenitz, 2001;King & Tucci, 2002). The importance of these two factors stands out in micro and small enterprises where the company owner-managers are often the only human resource at the disposal of the company.…”