Market leadership, technological progress and relative performance in the mobile telecommunications industry

Abstract

In network industries a large installed customer base is considered a key strategic asset that leads to a sustainable competitive advantage. This paper argues that market leaders should be able to demonstrate relative performance advantages vis-à-vis their competitors. Furthermore, we examine the moderating role of technological progress as a significant environmental factor that could alter the market leadership-relative performance relationship. The two-stage procedure proposed by Simar and Wilson (2007) is used to estimate relative performance determinants in the European mobile telecommunication industry. In the first stage, Data Envelopment Analysis (DEA) technique is used to measure performance, and in the second stage we empirically test our hypotheses by bootstrapping the DEA estimates with a truncated regression. Our results provide evidence that leaders enjoy performance advantages. The findings also reveal that the leader's relative performance is compromised in the event of technological progress.