Types of experience, and firm entry and exit decisions

Abstract

We provide new evidence for the impacts of prior experience on submarket entry and exit. Since the literature has produced contradictory evidence regarding this question, further exploration is necessary to know how pre-entry experience influences a firm’s submarket entry and survival. We particularly test the effects of prior transitioning experience in the magnetic tape drive and hard disk drive (HDD) industries, product diversification and technological capability, and market competition on entries into market niches. The results reveal that 1) prior transitioning experiences enhances a firm’s submarket entry, supporting an organizational learning argument; 2) firms’ age in the magnetic tape drive industry overall enhances a firm’s submarket entry, but it inhibits some submarket entries; 3) prior transitioning experience in the HDD industry enhances a firm’s new submarket entry into the magnetic tape drive industry; 4) product diversification experience enhances a firm’s entry into other submarkets; 5) technological capability enhances a firm’s entry into other submarkets; 6) fierce market competition enhances entry into new submarkets; and 7) technological capability enhances a firm’s entry into the HDD industry.