Experimentation Strategies and Entrepreneurial Innovation: Killer Apps in the iPhone Ecosystem
Jason E. Davis, Yulia Muzyrya, Pai-Ling Yin · Academy of Management Proceedings · 2014
Why are some entrepreneurial strategies more effective at generating innovations than others? We argue that the effectiveness of different strategies varies with market conditions defined by the supply tools (skills, technology) and demand structures (expectations, preferences) inherited from similar markets. To explore entrepreneurial innovation, we study new ventures in the iPhone application ecosystem. The development of “killer apps” (whether a software application appears in the top grossing rank on iTunes) is our key measure of innovation performance. We find robust evidence that simultaneous experimental strategies emphasizing products released concurrently are better suited to markets which inherit lots of skills, technology, clear expectations and demand for variety from similar markets. Sequential experimentation strategies emphasizing multiple versions produced over substantial time periods are better suited to more novel markets which inherit less skills and technology, unclear expectations and unit demand (non-games) from similar markets. Simultaneous strategies take advantage of the knowledge of customer preferences and technological development tools in similar markets and the heterogeneity of preferences in markets with demand for variety. Sequential strategies better deal with the challenges of developing the single best product for a novel market where there is both demand uncertainty and a lack of fundamental development tools.