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First Mover Advantage



First mover advantage is derived from a firm's ability to gain early entry into a new market. Significant payoffs exist when barriers to entry are created. In the early days of the PC industry, Microsoft created high barriers to entry by collaborating with Intel. Today, Microsoft still holds a dominant position with 90% market share of the PC operating system market. Lockheed Martin's early technological and partnership advantage with Russian aerospace companies allowed it to secure a leadership position in the global market for commercial space launches, servicing the satellite industry. The timing of strategic moves into international markets may be critical for success as a result of the positive advantages accruing to first movers. The set of advantages to be gained are costs advantages, preemption of geographic space, technological advantages, differentiation advantages, and political advantages. For first mover advantage, to materialize, it is necessary to create high barriers for competitors to enter the market, be the first to introduce new systems and to, exploit first mover advantage to achieve customer loyalty. There is no first mover advantage where there are low or zero barriers to entry by competitors. Indeed, it may involve much greater risk than being an early follower.
rst mover advantage
Tanya Sammut-Bonnici and Derek F.
First mover advantage is the benet derived
from a rm’s ability to gain early entry into
a new market. Lockheed Martin was the rst
Western aerospace rm to collaborate with
Russian aerospace companies. Its early techno-
logical and partnership advantage allowed it to
secure a leadership position in the global market
for commercial space launches, servicing the
satellite industry. Volkswagen moved into the
Chinese car industry in the early 1980s and has
secured its position among the leaders in the
country’s domestic market. Royal Dutch Shell
was one of the rst corporations to extract crude
oil in Nigeria in the middle of the last century
and it has retained a dominant position in the
country to this day.
Signicant payoffs exist when barriers to entry
are created. In the early days of the PC industry,
Microsoft created high barriers to entry for
computer operating systems by collaborating
with Intel to make Windows 95 exclusively
compatible with Intel x86 microprocessor archi-
tecture and vice versa. All PCs produced with
the chip came with a complementary installation
of the Windows operating system, which led
to an unprecedented global distribution of the
operating system. The media coined the effect
the “Wintel Advantage.” Microsoft still holds
a dominant position with 90% market share of
the PC operating system market as at November
The timing of strategic moves into interna-
tional markets may be critical for success as a
result of the positive advantages accruing to rst
movers. The set of advantages to be gained are
as follows:
Cost advantages associated with operating,
producing, or retailing in an overseas
market. Early entry can tie up key raw mate-
rial sources, distribution channels, and other
Preemption of geographic space such as for
key retail locations or international industry
Technological advantages gained by
capturing local skills and resources.
Differentiation advantages obtained from
operating in other countries pertaining
to variance in the methods of operation,
product, and service offering compares to
the host country’s resources.
Political advantages gained from a more
favorable regulatory environment in the host
For rst mover advantage, to materialize, it is
necessary to
create high barriers for competitors to enter
the market;
redene the business to use technology to
fundamentally transform the existing way
of operating, usually to provide a superior
quality of service at a signicantly reduced
be the rst to introduce new systems,
including the necessary investment to
achieve rapid growth to preempt the position
of any followers;
exploit rst mover advantage to achieve
customer loyalty to a brand position, which
will remain after competitors attempt to
There is no rst mover advantage where there
are low or zero barriers to entry by competitors.
Being rst is no guarantee of success. Indeed,
it may involve much greater risk than being an
early follower. For example, rst mover advan-
tage did not occur in the internet browser wars
for global dominance in the 1990s. Netscape,
which was the rst mover, lost its market share
to Internet Explorer within a few years of incep-
tion. Internet Explorer’s lead in global market
share is now being challenged by the rapid rise
of Chrome.
First mover disadvantages occur when
skills and know-how of rst movers are easy
to replicate;
copying is easy and customer switching costs
are low;
pioneering is expensive and experience
effects are low;
technological change is so rapid that early
investments rapidly become obsolete.
Wiley Encyclopedia of Management, edited by Professor Sir Cary L Cooper.
Copyright © 2014 John Wiley & Sons, Ltd.
See also advantage matrix;barriers to entry and
exit;competitive advantage;time-based competition
Dobrev, S.D. and Gotsopoulos, A. (2010) Legitimacy
vacuum, structural imprinting and the rst mover
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Frynas, J.G., Mellahi, K. and Pigman, G.A. (2006)
First mover advantages in international business and
rm-specic political resources. Strategic Manage-
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... First mover brands often enjoy more desirable market positioning and larger, more sustained market shares than later entrants (Hotelling, 1929;Robinson, 1988;Robinson & Fornell, 1985;Urban, Carter, Gaskin, & Mucha, 1986). For example, first movers can form partnerships, attain patents, and build infrastructure which raise barriers to entry for followers (Sammut-Bonnici & Channon, 2015). Earlier and more frequent exposure to first mover brands also causes consumers to remember first movers better and form more favorable attitudes towards them (Kardes & Kalyanaram, 1992;Kardes, Kalyanaram, Chandrashekaran, & Dornoff, 1993;Robinson, Kalyanaram, & Urban, 1994). ...
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In this paper we argue that the pace and scale of development in the information and communication technology industries (ICT) has had and continues to have major effects on the industry economics and competitive dynamics generally. We maintain that the size of changes in demand and supply conditions is forcing companies to make significant changes in the way they conceive and implement their strategies. We decompose the ICT industries into four levels, technology standards, supply chains, physical platforms, and consumer networks. The nature of these technologies and their cost characteristics coupled with higher degrees of knowledge specialisation is impelling companies to radical revisions of their attitudes towards cooperation and co-evolution with suppliers and customers. Where interdependencies between customers are particularly strong, we anticipate the possibility of winner-takes-all strategies. In these circumstances industry risks become very high and there will be significant consequences for competitive markets.
We advance first mover advantage (FMA) theory by examining how the pace of market evolution and technology evolution potentially enables or disables FMA. Integrating several streams of literature, we elaborate on the interplay among these two environmental (macro) conditions and the "isolating mechanisms" that underpin FMA. We model these dynamics to help researchers negotiate the current debate, arising from conflicting empirical evidence, on the conditions necessary for FMA to exist.
In this article the author examines business concepts advanced in the article "The Role of Environmental Dynamics in Building a First Mover Advantage Theory." Noted is the efficacy of the contention that first mover advantage applies to individual types of products and certain industries and that this quality is associated with market share measured against that of the competition. The author of the article examines the importance of lead time on the successful launch of a new product. Also discussed is the business strategy associated with first mover advantage and the cyclical timing associated with the marketing concept.
While the currently prevailing conceptual framework of first mover advantages (FMAs) specifies various market mechanisms through which first movers can gain pioneering benefits, it is incomplete by failing to consider the role of political resources in creating FMAs. In this context, this article aims to add the political mechanism to the current classification of FMA mechanisms. The article further serves as a window to an understanding of the long-term process of acquiring, sustaining, and exploiting firm-specific political resources in international business, which has been neglected in prior studies on business–government relations. Detailed analysis of three case studies suggests that the causal relationship between political resources and FMAs is a complex one; while non-market strategies can be used successfully by first movers, they can also be used by late movers to neutralize FMAs. The article proposes a model for understanding the link between FMAs and political resources. Copyright © 2006 John Wiley & Sons, Ltd.