The influence of prior industry affiliation on framing in nascent industries: the evolution of digital cameras

New industries sparked by technological change are characterized by high uncertainty. In this paper, we explore how a firm's conceptualization of products in this context, as reflected by product feature choices, is influenced by prior industry affiliation. We study digital cameras introduced from 1991–2006 by firms from three prior industries. We hypothesize and find that: (1) prior industry experience shapes a set of shared beliefs that results in similar and concurrent firm behavior; (2) firms notice and imitate the behaviors of firms from the same prior industry; and, (3) as firms gain experience with particular features, the influence of prior industry decreases. This study extends previous research on firm entry into new domains by examining heterogeneity in firms' framing and feature‐level entry choices. Copyright © 2011 John Wiley & Sons, Ltd.     

Second Mover Advantage and Entry Timing

We describe a model of entry timing assuming that a second mover can benefit from observing the experience of a first mover. We focus on how market attractiveness characteristics such as size and cost affect the time until first entry. The effects depend on whether the number of participants is exogenous or endogenous. In the former case, a more attractive market leads to earlier entry. In the latter case, it leads to later entry. Treating the number of firms as an integer, free entry leads to non‐monotone, but testable, effects of market attractiveness on entry timing.     

Surviving the gales of creative destruction: the determinants of product turnover

Innovative industries are often characterized by rapid product turnover. Product longevity may be driven by both a product's position within a market as well as its position within a firm's larger product portfolio. However, we have little understanding of the relative importance of these factors in determining product turnover and how they interact as an industry evolves. Although researchers have invested substantial effort in analyzing firm survival and turnover, there are far fewer studies of the determinants of product survival and turnover. We use hazard rate models and count regression models to describe the behavior of firms and their products with a new and detailed database on the laser printer industry. We show, first, that competition and market structure variables have a large impact on both speeding product exit and delaying product entry. Second, there is some evidence that firms that have maintained a high market share for a number of years keep their products on the market longer than those with lower market share. Finally, firms with high innovative capacity tend to enter markets frequently, but withdraw their products at average rates. Firms with strong brands tend to introduce few products and withdraw their products slowly. With these findings, the paper links product entry and exit decisions to the broader literature on firm strategic and product management. Copyright © 2006 John Wiley & Sons, Ltd.     

Internationalization, Local Adaptation, and Subsidiary's Entrepreneurship: An Exploratory Study on Taiwanese Manufacturing Firms in Indonesia and Malaysia

This inductive research attempts to explore the dynamics of firm internationalization process, with a focus on a manufacturing firm's first-time foreign entry endeavor. By conducting comparative analyses based on six cases of Taiwanese manufacturing firms who have established production bases in Indonesia and Malaysia, we postulate a conceptual framework entailing relationships among entry decision, implementation strategy, and local adaptation. We highlight the role of subsidiary's entrepreneurial initiatives play in achieving required extent of local adaptation and hence successful implementation for companies lacking sufficient experiential knowledge of internationalization. Propositions based on the conceptualization are detailed and the implications of these qualitative insights are discussed, with an expectation of contributing to the extant theories of internationalization.     

Entry timing and innovation strategy in feature phones

Research summary : This inductive study examines how firms make decisions about the timing of innovations, focusing on the mobile handset industry during the feature‐phone era. Through qualitative and quantitative data, we reveal how individual technology‐entry decisions are influenced by a portfolio‐level timing preference, and how this preference informs other aspects of innovation strategy, too. Early movers address greater, more uncertain revenue opportunities with broader, less selective innovation portfolios. Conversely, late movers target lower, more certain revenue opportunities with narrower, more selective portfolios. While timing per se seems unrelated to performance, a timing‐strategy alignment is. Future research on the equifinal configurations we propose—broad/nonselective for early movers and narrow/selective for late movers—could thus help resolve the debate about the link between timing and performance. Managerial summary : We study how firms make decisions about the entry of new product features, in this case mobile phone technologies. During development firms weigh the scale and likelihood of features' commercial success. Some firms display a preference for earlier entry, which offers temporary monopoly rewards if uncertainty resolves favorably, while others tend to opt for later entry, which offers greater certainty but lower rewards due to competitive preemption. The innovation portfolios of these companies thus pursue differently structured opportunities, bringing about different strategic approaches. Since early movers aim for big hits to compensate for a higher failure rate, they launch a broader set of features and exert little selective pressure on the development portfolio. By contrast, late movers' lower payoffs reduce their tolerance for failure, making them launch fewer features and emphasize selectiveness; i.e., they invest in learning from the resolution of uncertainty so as to choose features more discriminately. When we examine innovation performance, timing has no significant effect but matching timing with feature breadth does. Copyright © 2015 John Wiley & Sons, Ltd.     

Location choices under strategic interactions

We explore a fundamental aspect of firms' location choices largely overlooked in the literature: strategic interaction. We formalize the notion that strategic interaction renders collocation less appealing by fostering competition, which erodes firms' profits. Strategic interaction also impacts location choices across time. Specifically, because firms learn by doing in markets, location choices are shaped by two novel effects: entrenchment benefits from entering early in a market and improving capabilities relative to rivals, and opportunity costs from postponing entry to other markets where rivals enter and learn. When learning is local, firms collocate more: rivals are preempted from improving relative capabilities in higher‐value markets. However, when learning is global, firms collocate less: they can transfer capabilities from lower‐value to higher‐value markets, blocking rivals from achieving entrenchment benefits. Copyright © 2013 John Wiley & Sons, Ltd.     

Capabilities,technologies, and firm exit during industry shakeout: Evidence from the global solar photovoltaic industry

Research Summary: Explanations of entrants’ survival in an emerging industry are premised on pre‐entry capabilities or technology entry choices prior to the emergence of the dominant design. We consider how these drivers interact to strengthen or nullify firms’ pre‐entry advantage, and facilitate adaptation as the industry evolves. We also expand the treatment of exit by separating dissolution from acquisition, in which firms’ capabilities continue to be utilized in the industry. Studying a recent shakeout in the global solar photovoltaic industry, we find that pre‐entry capabilities and technology choices act in a complementary manner for some firms, thereby enhancing survival, and as buffers against exit for others. Nearly half of exits were via acquisitions, and technology choice at entry played an important role in determining how firms exited. Managerial Summary: New industries are often characterized by intense technology competition that culminates in a dominant technology followed by industry shakeout. Although prior research underscores the central role of technology choice and firm capabilities to survival, we do not actually know how firms with different capabilities and who have made competing technology choices survive an industry shakeout. In this article, we show how entrants’ capabilities and technology choices can act in a complementary manner for some firms, enhancing their chance of survival, and as buffers against failure for others. Moreover, we explain why some firms that do exit are acquired, when others are dissolved.     

AN EVOLUTIONARY PERSPECTIVE ON DIVERSIFICATION AND CORPORATE RESTRUCTURING: ENTRY,EXIT, AND ECONOMIC PERFORMANCE DURING 1981–89

This study proposes a theoretical perspective that firms engage in continuous search and selection activities in order to improve their knowledge base and thereby improve their performance. This general framework is applied to the context of corporate evolution. Entry and exit activities are understood as search and selection undertaken by the firm to improve their performance. One of the compelling features of this framework is that firms learn from their past entry experience and approach the next entry in a more focused and directed manner over time. Also, firms acquire additional knowledge from each entry event while applying their existing knowledge base. With a longitudinal (1981–89) data base on entry and exit activities of all publicly traded manufacturing firms in the United States, this study shows that applicability of the firm's knowledge base plays an important role in predicting which businesses a firm enters or exits. Firms sequentially enter businesses of similar human resource profiles and firms are more likely to divest lines of business of different profiles. Corporate-level analysis shows that such well-directed entry and exit contribute to the improvement of a firm's profitability.     

Confidence in learning: Inter‐ and intraorganizational learning in foreign market entry decisions

From an organizational learning perspective, we argue that the information signaled by the distribution attributes of foreign investors already operating in a location will influence the entry decisions of later arrivals by affecting their level of confidence in imitating. In the context of foreign investment decisions, the proportion of experienced firms in a location was shown to first increase a follower firm's confidence about imitating them, but then to decrease it, due to anticipated competition. The impact of learning from target organizations also varies with the experience of the learning organization. Data on the location choices of 7,478 manufacturing ventures in China by U.S. firms supported the hypotheses. The results provide a more integrated and nuanced understanding of learning in foreign direct investment. Copyright © 2014 John Wiley & Sons, Ltd.     

Does pre‐entry licensing undermine the performance of subsequent independent activities? Evidence from the global aerospace industry, 1944–2000

We study how firms' use of in‐licensing for their initial entry to a business domain can detract from the performance of their subsequent autonomous endeavors in the domain. We argue that in‐licensing produces high levels of causal ambiguity about factors that drive the performance achieved with the licensed product. In turn, the experience that firms gather through pre‐entry licensing is likely to generate superstitious learning and overconfidence that undermine the performance of licensees' subsequent independent operations. The biases will be particularly strong in the face of contextual dissimilarity. We find consistent evidence in a study of firms that entered the global aircraft industry between 1944 and 2000. The research helps advance the understanding of the benefits and costs of markets for technology. Copyright © 2012 John Wiley & Sons, Ltd.     

Microeconomic and Macroeconomic Influences on Entry and Exit of Firms

We examine the entry and exit process in the Finnish manufacturing industry using a six year panel of three-digit industries. The results show that scale economies form a significant entry barrier, but the evidence on their role as an exit barrier is weaker. Industry growth has a positive influence on entry and a negative influence on exit, but also variables describing the general economic climate have an influence on the entry-exit process. The variables describing the monetary transmission mechanism have an expected influence on entry. However, the role of macroeconomic influences on exit is inconclusive. Both entry and exit have almost unit elasticity with respect to industry size, measured by the number of firms in the previous period. Entry and exit rates are therefore practically independent of industry size.     

Why Do Firms Enter a New Product Market? A Two‐Dimensional Framework for Market Entry Motivation and Behavior

What are the energetic forces that induce established firms to enter new product markets? While most previous research has explained the economic profits expected from a new product market as firms' distinctive motivation for market entry, some recent studies also emphasize interfirm competition and benchmarking activities as another important factor that motivates firms' new market entry. To explain the established firms' diverse new product market entry behaviors, this study presents a two‐dimensional scheme of entry motivation in terms of the degrees of target market profit focus and competitor focus. The first dimension captures the economic motivation of firms' new market entry that ranges from focusing on the direct expected profits from the target market to considering more strategic/indirect benefit incentives. The second dimension captures the degree of firms' external motivation for entry affected by competitors that ranges from independent entry decisions to fully competitor‐oriented entry decisions. Using multiple‐industry survey data, the current study empirically verifies that these two entry motivation dimensions explain a great portion of actual firms' new product market entry behaviors and that they are independent of each other. Subsequently, this study validates that firms' operational size and their environmental factors like perceived technological uncertainty and competitive intensity upon new market entry affect the degrees of the two dimensions of firms' new product market entry motivation. More specifically, large firms less emphasize target‐market profits than small firms, and when perceived technological uncertainty is high, potential market entrants become less target market profit focused but more competitor focused. Under a highly competitive new market condition, firms focus on both target‐market profits and competitors. Based on the analysis of new market entry motivation dimensions, the current study proposes a new typology of established firms' market entry behaviors. The suggested typology represents the four different types of new product market entrants and examines specific characteristics and entry strategies for each type of potential entrants. This entry‐motivation framework should provide a deeper understanding of the backgrounds of entry behaviors and assist firms in developing appropriate entry strategies and in advantageously responding to rival firms' actions with regard to entry.     

What really is alliance management capability and how does it impact alliance outcomes and success?

Strategy scholars have asserted that a firm's alliance capability provides competitive advantage. As interest in alliance capability has grown, we see two streams of research emerge that address different, but equally important, issues related to this subject: one stream that focuses on how alliance capability develops in firms, and a second stream that investigates what elements specifically constitute a firm's alliance capability. In recent literature, the question of how firms develop alliance capability has received greater attention than the question of what elements actually comprise it; therefore, in this study we address the latter issue in great depth. We do this by building on prior research and on our fieldwork, to conceptualize alliance management capability as a multidimensional construct that comprises three distinct but related aspects or skills to address the following aspects in managing a given individual alliance after it is up and running: coordination, communication, and bonding. We then test our conceptualization in a framework that also links this capability to relevant outcomes at the alliance and firm level. We use survey and secondary data from a large sample of interfirm relationships between software service providers and three major global software vendors. We find general empirical support for our conceptualization of alliance management capability and for its predictive validity in impacting certain alliance outcomes. Copyright © 2009 John Wiley & Sons, Ltd.     

Opportunity costs,industry dynamics,and corporate diversification: Evidence from the cardiovascular medical device industry, 1976–2004

This paper examines how demand conditions across alternative markets impact diversification decisions and firm performance by influencing the opportunity costs of deploying non‐scale free capabilities. Using data within the cardiovascular medical device industry, this study shows that: (1) firms with a larger stock of pre‐entry innovation experience are more likely to diversify; (2) firms in a current market with greater relative demand maturity are more likely to diversify; (3) diversification is associated with a performance decrease in the current market; and (4) diversification is associated with a performance increase at the corporate level. These findings shed new light on the self‐selection process of corporate scope, the conceptualization of firm capabilities, and the connection between industry dynamics and resource deployment. Copyright © 2013 John Wiley & Sons, Ltd.     

Exploring the sociocultural determinants of de novo versus de alio entry in emerging industries

The influence of institutional factors on firm entry has long interested strategy scholars. However, we have limited understanding of how the sociocultural environment, defined as the unwritten, decentralized “rules of the game,” influences founding rates in emergent industries; we know even less about how these noneconomic factors differentially influence entry by new entrepreneurial (de novo) firms versus diversifying incumbent (de alio) firms. Utilizing a unique dataset on entry in the green building supply industry, we find that, while economic and policy factors are highly correlated with de alio entry, the sociocultural environment exerts a greater influence on de novo firms. Our findings contribute to the literature on corporate demography, institutions and entrepreneurship, and industry emergence. Copyright © 2013 John Wiley & Sons, Ltd.     

Selection versus evolutionary adaptation: Learning and post-entry performance

This paper examines the maturation process of firms that enter an industry by constructing new plant and investigates the extent to which improvements in the performance of any entry cohort are the result of a selection process that culls out the most inefficient entrants or of a learning process that allows survivors to improve their performance relative to incumbent firms. Both selection and evolutionary learning are found to affect post-entry performance, but selection per se is a more important contributor to the overall growth of a cohort.     

Quantity competition with access fees

We analyze an oligopoly model where firms choose both quantities and access fees. Per unit prices are determined endogenously to equate quantity demanded with quantity supplied at each firm. In a Nash equilibrium of the game played by firms, the per unit prices equal marginal cost and access fees may or may not extract all consumer surplus. As the number of firms increases, access fees fall below net consumer surplus and toward zero. Existence is guaranteed if Marshallian consumer surplus is not too concave. With open entry, quantity competition with access fees may be less efficient than without access fees.     

Buyer power with atomistic upstream entry: Can downstream consolidation increase production and welfare?

This paper investigates the effects of buyer power on entry into an atomistic upstream market and economic welfare. Under reasonable market conditions, we show that industries with a few buyers induce more upstream entry than industries with a larger number of firms. In particular, monopsony can be more conducive to entry and lead to higher social welfare than more fragmented industry structures. This seeming paradox arises because a single buyer better internalizes the positive effects of entry on later-periods’ supply conditions than a collection of firms. This result is relevant in a number of market settings, including markets for specialized labor and processing markets for agricultural products.     

DESIGNING A MARKET STRUCTURE WHEN FIRMS COMPETE FOR THE RIGHT TO SERVE THE MARKET*

In many industries, a regulator designs an auction to select ex‐ante the firms that compete ex‐post on the product market. This paper considers the optimal market structure when firms incur sunk costs before entering the market and when the government is not able to regulate firms in the market. We prove that a free entry equilibrium results in an excessive entry when the entry costs are private information. Then, we consider an auction mechanism selecting the firms allowed to serve the market and show that the optimal number of licences results in the socially optimal market structure. When all the potential candidates are actual bidders, the optimal number of firms in the market increases with the number of candidates and decreases with the social cost of public funds. When the market size is small, as the net profit in the market decreases with the number of selected firms, entry is endogenous. As increasing competition in the market reduces competition for the market, the optimal structure is more concentrated than in the previous case.     

The impact of industry environment on early market entry decisions by B2B managers in the U.S. and Japan

Managers form simplified mental models to cope with market environment uncertainties and to process information. A critical decision is whether to enter a high-potential market early. Large innovation and development investments involved in this decision increase uncertainty. We examine the importance ascribed by U.S. and Japanese managers to competitive forces when making early market entry decisions. We expect that the competitive forces will have different effects on the likelihood of early market entry in the U.S. versus Japan due to cultural and business environment differences, and we thereby develop several propositions. We develop a decision-making exercise simulating early market entry decisions, and tested our propositions with managers in medium to large business-to-business (B2B) firms from both countries. We assessed impacts of the competitive market forces on entry strategy selection via relative weights, repeated-measures analysis of variance, and frequency analysis. Our findings revealed differences in the mental models of Japanese and U.S. managers. Buyer power had a larger effect on the decision to make an early market entry for Japanese managers, while threat of new firm entry had a larger effect for U.S. managers; these findings were consistent with our propositions. We also found several areas of agreement between U.S. and Japanese managers. We conclude with theoretical implications and recommendations to B2B management.