Sequential Innovation in Mobile App Development

Abstract

Problem definition: In today’s highly dynamic and competitive app markets, a significant portion of development takes place after the initial product launch via the addition of new features and the enhancement of existing products. In managing the sequential innovation process in mobile app development, two key operational questions arise. (i) What features and attributes should be added to existing products in successive versions? (ii) How should these features and attributes be implemented for greater market success? We investigate the implications of three different types of mobile app development activities on market performance. Academic/practical relevance: Our study contributes to the operations management literature by providing an empirically based understanding of sequential innovation and its market performance implications in mobile app development, an important industry in terms of size, scope and potential. Methodology: Using a novel data set of mobile apps in the Productivity category, we leverage text-mining and information retrieval techniques to study the rich information in the release notes of apps. We then characterize product development activities at each version release and link these activities with app performance in a dynamic estimation model. We also incorporate an instrumental variables analysis to substantiate our findings. Results: We find that greater update dissimilarity (i.e., dissimilarity of the features and attributes of a new update from those of previous updates) is associated with higher performance, especially in mature apps. We also find that the greater the product update market orientation (i.e., the greater the similarity of the focal firm’s new features and attributes with respect to the recent additions of its competitors), the higher is the market performance. This finding suggests that the market rewards those developers who have a responsive policy to their competitors’ product innovation efforts. Our results also suggest that a rapid introduction of updates dampens the potential market benefits that the mobile app developers might gain from market orientation. We find no evidence of a beneficial effect of product update scope (i.e., incorporating features and attributes from other product subcategories) on market performance. Managerial implications: Our study offers managerial insights into mobile app development by exploring the sequential innovation characteristics that are associated with greater market success in pursuing and implementing new features and attributes.