Abstract
We advance first mover advantages literature by adding novel insights into the conditions that affect the persistence of first mover profitability and market share. We investigate the role of two industry dynamics — market growth and technological discontinuity — and we argue that they will negatively affect the persistence of first mover performance. We test our hypotheses in the context of the European mobile communications industry, by estimating System GMM models on a longitudinal panel of 65 companies in 19 markets, over the period 1998–2008. Model estimations confirm that industry dynamics affect the persistence of first mover advantages. For instance, we find robust empirical evidence that technological discontinuity is detrimental to both first movers’ market share and profitability.
Highlights
Whether first mover advantages (FMA) exist or not has been a popular topic for debate in the management and economics literatures
Building on extant FMA research (Suárez and Lanzolla, 2007), we identify two characteristics of the external context of a firm– market growth and technological discontinuity – whose dynamics are likely to affect the persistence of first mover advantages
The first model introduces only the variable accounting for the first mover effect and the control variables, model 2 adds the direct effects of industry dynamics, and the full model incorporates the effect of the market growth and technological discontinuity variables on the persistence of first movers’ advantage effects
Summary
Whether first mover advantages (FMA) exist or not has been a popular topic for debate in the management and economics literatures. Existing empirical studies have offered mixed results, most of them find significant support for a positive relationship between order of market entry and performance. This was the finding, for example, of VanderWerf and Mahon’s (1997) meta-analysis, which showed that 54 out of 66 empirical tests undertaken in the academic literature offered support for the notion of first mover advantages. Building on the results of the empirical studies carried out over the last 20 years, Lieberman and Montgomery (2013) conclude that “FMA often exist even though they are by no means inevitable”. Some studies have focused on empirically testing the FMA isolating mechanisms (Lieberman and Montgomery, 1988) that should protect first movers from imitative competition such as customer switching costs (Gomez and Maicas, 2011) and experience curves and resource preemption (Boulding and Christen, 2008)
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