It's never too late (to enter)… till it is! Firms' entry and exit in the digital audio player industry

We study the determinants of firms’ exit from product segments in a technologically dynamic industry to understand whether exit depends on entry timing, the pre-entry experience of entrants, and the presence of a dominant firm in the segment. Relying upon a detailed database of products from the digital audio player industry since its inception, we find that late entry in a product segment is beneficial for a firm’s survival. Firms without prior experience in related markets have a higher hazard of exit from a product segment than those having previous experience. However, late entry into a product segment can mitigate this negative effect. We find also that the presence of a dominant firm in a product segment is generally associated with an increase in the hazard of exit for all the firms, but this effect is less evident for the firms that entered before the dominant firm. These results show that in industries with heterogeneous demand and several market segments, delaying entry into a specific segment may represent a successful strategy, especially for those firms that are relatively inexperienced. This strategy, however, can backfire if entry occurs ‘too late’, specifically after the dominant firm has entered the segment.