Experience base, strategy‐by‐doing and new product performance

Abstract Research Summary Strategy research views firms' diverse experience base as critical to new product success. It also champions strategy‐by‐doing in entrepreneurial settings. This study juxtaposes and bridges these two perspectives to better understand product development. We propose that while a firm's product portfolio diversity contributes to new product success only to a certain degree, design iteration—a postlaunch strategy‐by‐doing approach—is positively associated with new product performance. Our core contribution points to a complementary relationship: strategy‐by‐doing helps mitigate the capacity constraints problem that prevents firms from successfully adapting product development capabilities to a dynamic market. Our analysis of a sample of 2,182 nascent mobile apps from 564 top producers in the U.S. market supports our hypotheses. We discuss implications for product development, strategy‐by‐doing, and technology innovation literature. Managerial Summary Successful product development establishes firms' competitive advantage. The burgeoning digital economy increasingly prompts product development to depend on strategy‐by‐doing and requires firms to adapt a product's design over its lifecycle. Through analyzing a sample of newly launched mobile apps in the U.S. market, we find that while a firm's product portfolio diversity improves new product success to a certain degree, design iteration, a distinct approach to strategy‐by‐doing, underpins a new product's continual attractiveness to users. Moreover, frequent design iterations can overcome the barriers that innovator firms face when applying a diverse repertoire of experiences to product development.