Entrepreneurial Innovation: Killer Apps in the iPhone Ecosystem The American Economic Review 104, 5 (2014) 1-7
The mobile applications ( apps) industry has exhibited rapid entry and growth in the midst of a recession. Since Schumpeter ( 1943) , entrepreneurs have been identified as a source of innovations, yet there is a lack of empirical research on the processes employed by entrepreneurs to produce innovations.1 We study innovations in the iPhone application ecosystem, examining how the development of “killer apps” ( whether a software application appears in the top grossing rank on iTunes) varies by market and app characteristics. We find that later apps by a developer are more likely to be killer apps if they are games, but there is no significant effect for non-games. More updates help non-game apps, but games with no updates are more likely to be killer apps. The heterogeneity in demand and more intense competition in the games category may explain the difference in successful innovation processes compared to the non-games category, characterized by opportunities for cumulative improvement of apps and homogeneous demand.