Abstract

This paper examines how firms identify opportunities from their product development experience and how such learning affects the launch of subsequent products. I develop a theoretical framework that focuses on how the breadth and depth of experience provides information on opportunities in uncertain environments. Specifically, I created the concept of functionality that captures what purposes firms’ products provide for the customers. I predict that product experience allows firms to learn about the underlying functionalities and they use such information to guide subsequent product launches. Using fine-grained data on mobile application developers in the US Apple Store ecosystem, I find that firms with greater functionality breadth in their prior product experience are more likely to launch new product, and the effect is largely in firms’ core functionalities rather than peripheral and new ones. In particular, these new product launches tend to highlight more of these core functionalities as opposed to recombining with new functionalities. These findings suggest that in uncertain environments, experience breadth has the surprising merit of enabling firms to gain greater clarity in their core functionalities through establishing the boundaries and connections of different functionalities.

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