Product-line expansion and resource cannibalization

Diversification research argues that new products are more successful when they leverage a firm's intangible resources, which may support multiple activities without engendering rivalry for their use. However, numerous complementary resources may also be needed to exploit a firm's intangibles. If these resources are in limited supply, or if it takes time to acquire and assimilate additional resource capacity, then new products may impose costs on existing products by cannibalizing the services of firm resources. Our analysis of product introductions within the pharmaceutical industry provides evidence of resource cannibalization and suggests that product market experience helps offset some of these costs.