Late Mover Advantage Research Articles

Evolving user needs and late-mover advantage.

We propose a generalized NK-model of late-mover advantage where late-mover firms leapfrog first-mover firms as user needs evolve over time. First movers face severe trade-offs between the provision of functionalities in which their products already excel and the additional functionalities requested by users later on. Late movers, by contrast, start searching when more functionalities are already known and typically come up with superior product designs. We also show that late-mover advantage is more probable for more complex technologies. Managerial implications follow.

Early Mover or Late Mover Advantage for Hotels?

Theories on early and late mover advantages predicate that competitive operating advantages can occur with respect to the relative timing of market entry. Suspecting that “early mover” hotels can preempt desirable micro-locations for hotel operations, the current study tests for early mover advantage created by locations not fully imitable. Estimation of spatial econometric model reveals evidence of an early mover advantage. We also find that the effect of depreciation of older hotels may serve as a competitive advantage for new entrants with new facilities, although there was no considerable benefit for late movers. Furthermore, through additional tests we find the early mover advantage consistently significant for both chain and independent hotels. Implications and suggestions for future research are discussed.

A Structural Analysis of Detailing, Publicity and Correlated Learning: The Case of Statins

When Lipitor, an anti-cholesterol drug (statin) of Pfizer, hit the market in 1997, Pfizer did not establish any direct evidence on its ability in reducing heart disease risks. Despite its lack of direct evidence, Lipitor became very successful. To explain this puzzle, we propose a theory of correlated learning and indirect inference by physicians. We define a variable, “efficiency ratio,” which measures how efficiently a drug can convert reduction in cholesterol levels to reduction in heart disease risks and allow the physicians’ initial prior belief on the efficiency ratio to be correlated across drugs. Landmark clinical trials provide information about drugs’ efficiency ratios. Because of the correlated prior perceptions, a new clinical trial’s information on a drug’s efficiency ratio can update physicians’ belief on other statins’ efficiency ratios. Physicians then infer each statin’s ability in reducing heart disease risks based on the perceived efficiency ratio and its ability in reducing cholesterol. Thus correlated learning may allow late entrants to free-ride on the scientific evidence and informative marketing activities of the incumbents.In our estimation, we supplement product level market share data with data on patients' switching rates and discontinuing rates. This allows us to take the presence of switching costs and refilling costs into account when estimating our model. Our estimation results suggest that there is information spillover of landmark clinical trial results across drugs. This, together with the fact that Lipitor is very effective in lowering cholesterol levels, allow Lipitor to gain late mover advantage. Moreover, we find that intensive detailing efforts (via its informative and persuasive roles) also contribute to its success.

Governance- and Market-driven Sources of Advantages in Emerging Markets

Significant research on emerging markets has been put forth in the past couple of decades. Emerging markets have been defined as geographies with low-income but rapid-pace growth, most of which fueled by recent economic liberalization policies (Hoskisson et al., 2000). Mainstream management research has portrayed these contexts as being subject to significant institutional voids (Khanna and Palepu, 1997), which cause intermediary markets--for inputs, labor, and capital--to fail more often. This conceptual background has led to a significant volume of research on organizational and competitive strategies leveraged by local firms to access key resources, such as vertically integrating more often, and forging business groups (e.g., Khanna and Rivkin, 2001), or adopting non-market strategies (e.g., Henisz and Zelner, 2003). In this symposium we wish to examine more recent research that look beyond the institutional void and the associated transaction costs that give rise to firm strategies emphasizing greater degrees of vertical integration or even accentuating efforts in political markets. Our aim is not to deny this earlier and very important background, but rather supplement it, by lining up new theoretical developments that examine certain qualities in the emerging market context and proposes distinct strategic approaches for handling them. For instance, emerging countries tend to have a greater presence of the State in multiple markets (e.g., Cuervo-Cazurra et al., 2014), which make state ownership of businesses more likely. They also tend to display greater likelihood of economic volatility in these markets that make early and late mover advantages have distinct prospects vis-à-vis those observed in developed countries (e.g., Garcia-Sanchez et al, 2014). Moreover, these contexts also increase the possibility that public and private domains of businesses can be complementary, rather than substitutes, when important contingencies are considered, thereby creating the prospect of hybrid modes of governance (e.g., Cabral et al., 2010). Emerging markets are also known to be attractive locations for MNC subsidiaries, although many of them may find it hard to fight off internal isolation in the global structure of the company (Monteiro et al., 2008). The guiding principle of our symposium is thus to push scholars interested in Emerging Markets and Strategic Management to span beyond current theoretical thinking, and ask themselves what new domains of theory and practice are emerging but have yet to be fully explored, and how are these emerging initiatives in the field handling such opportunities? We hence bring together a collection of papers that outline some of these new theoretical avenues to exploring opportunities in emerging markets. Organizational Isolation and Know How Transfer in MNCs Presenter: Felipe Monteiro; INSEAD State Capitalism on the Rise Presenter: Aldo Musacchio; Harvard U. Strategy through the Business Cycle in Highly Volatile Contexts Presenter: Roberto Vassolo; IAE Business School Argentina Hybrid Governance in Public – Private Partnerships Presenter: Sandro Cabral; Federal U. of Bahia

The mechanism of the late mover advantage in mid-product for the electronics industry: a case study on CRT

There have been many cases where late movers from countries other than the countries of the first movers have entered the business of mid-product in the electronics industry, and surpassed the pioneering company. This study analyses where the superiority of late movers lies. From the perspective of innovation dynamics, product innovation and process innovation are end-stage occurrences, while the establishment of dominant design and dominant process is a condition of late mover advantage. Under this condition, there is low risk of change to product and process, allowing the late mover to focus on production. From the perspective of a competitive advantage of nations, lower production costs in the late mover’s country than the first mover’s countries are necessary. From the perspective of technology acquisition, the late mover is capable of procuring materials and production equipment.

Interdependence in Comparative Politics

Interdependence is ubiquitous and often central across comparative politics. Indeed, as the authors show first, theoretically, any situation involving externalities from one unit's actions on others' implies interdependence. Positive or negative externalities induce negative or positive interdependence, which spurs competitive races or free riding, with corresponding early or late-mover advantages, and thus strategic rush to act or delay and inaction. The authors show next how to model interdependent processes empirically, how not doing so risks omitted-variable biases favoring domestic and exogenous-external accounts over interdependence, but how doing so naïvely risks simultaneity biases with the opposite substantive implications. They then discuss how to estimate properly specified interdependence models and, finally, how to interpret and present estimated spatio-temporally dynamic effects, response paths, and long-run steady-states, with associated standard errors. They illustrate by replicating a noteworthy earlier, nonspatial study of capital tax competition. Web appendices contain further technical details, literature survey, data, statistical software code, and spreadsheet templates for all suggested procedures.

Late-mover advantage and product diffusion

The diffusion of a new product, the price of which is expected to fall progressively, is modelled as a sequence of Wars of Attrition. The likely pattern of diffusion is found to be reasonably consistent with the empirically observed S-shape.

Persuasion or Information? The Economics of Prescription Drug Advertising

THE economic and welfare effects of advertising have been extensively studied over the last half-century. However, these efforts have not led to a consensus either as to the effects or the value of advertising. Economists continue to reach polar conclusions that appear to be derived mainly from preconceptions of the social desirability of advertising. On the one hand is research that emphasizes promotion's ability to create "artificial" product differentiation and thereby produce informational confusion.1 This line of research stresses the empirical association of extensive advertising with high concentration and high accounting profits-evidence judged to support increased market power and entry barrier effects.2 A contrary body of research emphasizes the value of advertising in providing information and, hence, in promoting competition.3 The empirical findings most consistent with this view are that prices paid by consumers in (selected) markets are lower with advertising than without it.4