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Market-Based Solutions to Vital Economic Issues
Research
Mar 1, 2014

Learning and product entry: How diversification patterns differ over firm age and knowledge domains in U.S. generic drug industry

Abstract

This study uses learning theory to show how knowledge domains affect product extension decisions and how these product decisions change as firms age. Faced with the choice of new product-markets, a firm might decide to introduce a similar product, by leveraging existing firm knowledge, or to experiment with a less familiar product, which requires new knowledge. Using data on new drug introductions in the US generic pharmaceutical industry, the analyses showed clear support for heterogeneous product-market entry patterns across knowledge domains as the firm ages. Across time, the form of learning shifts from exploration to exploitation.


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