Zooming In or Zooming Out: Entrants' Product Portfolios in the Nascent Drone Industry

Abstract

Faced with demand uncertainty and heterogeneity in a nascent industry, entrants often consider which customer segments to serve by tailoring the usage breadth and coherence of their product portfolios. Portfolio usage breadth is the extent to which products in a portfolio collectively span distinct customer segments, whereas portfolio coherence is the extent to which targeted customer segments of products in a portfolio overlap with each other’s customer segments. We suggest that when entrants have prior use experience in contexts that are potential users of the new product, their portfolios exhibit low usage breadth and high coherence, due to demand-oriented cognition and knowledge. The relationship is moderated by whether they are startups or diversifying entrants. The empirical context is the U.S. commercial drone industry.