Experience, Consumers, and Fit: Disentangling Performance Implications of Preentry Technological and Market Experience in 2G Mobile Telephony

Abstract

We offer theory and evidence about how the fit between firm experience (supply side) and consumer preferences (demand side) affects postentry performance into a new technology. Specifically, we explore different types of preentry experience (technological and market experience) and use different aspects of postentry performance to draw inferences about consumer heterogeneity. Preentry technological experience (same product and different consumers) helps firms attract a larger share of intensive users (aligning with early adopters) but only if they enter the market early when these adopters make decisions. Preentry market experience (different product and same consumers) helps firms attract a larger share of lighter users, consistent with characterizations of mass market users. Exploiting different components of firm performance in the global second-generation mobile telecommunications industry (average usage intensity and market penetration) allows us to articulate and identify the paths and mechanisms that allow preentry experience to affect postentry performance. The theory as well as important theoretical boundary conditions have implications for research on preentry experience, demand-side heterogeneity, and industry evolution.