Hitting reset: Industry evolution, generational technology cycles, and the dynamic value of firm experience

Research Summary We study how the value of depth and breadth of experience shifts across generational technology cycles and industry evolution. Experience breadth builds organizational flexibility that is valuable during technology transitions and when the industry is younger, while experience depth builds domain-specific resources that are important during periods of technology stability and later periods of industry evolution. We test our theory in the console game industry, where publishers face repeated periods of transition and stability across multiple console generations. We find support for most hypotheses, except that the value of breadth correlates with the magnitude of any transition instead of decreasing linearly over time. We contribute to research on the changing value of firm experience and to the understanding of generational technological change during industry evolution. Managerial Abstract Many industries face generational changes. How incumbent firms handle those transitions is important to firm survival and success. We study how the prior experience of video game publishers helps them navigate transitions. First, we find that firms with deep experience in a genre produce more successful games in that genre only during stable periods in the industry. Second, the benefits of deep experience increase over time as some of the experience-built capabilities of the firm survive technological transitions. Third, broad and diversified firms perform best during generational transitions as they successfully enter new domains made popular by the generational shift. We suggest that the product strategies of video game firms should depend on the relevant experience they possess and the degree of environmental change.