First-Mover (Dis) Advantage

20 September 2006 at 3:56 am Lasse Leave a comment

| Lasse Lien |

Whether you are interested in competitive advantage, entrepreneurship, innovation, regulation, or several other issues, the concept of first-mover (dis)advantage will probably be of considerable importance. The literature has, of course, supplied a number of important insights on what might account for both advantages and disadvantages from moving early. Nevertheless, browsing through this literature, I get a sneaking feeling that it tends to produce somewhat loosely structured lists of possible mechanisms. A possible avenue of attack for adding more structure to these insights might be to reduce the problem to the basic asymmetries between the first and later movers, and from there gradually introduce the effects of resource heterogeneity, asymmetric motivation, strategic interaction, etc. But what, then, might count as the basic asymmetries?

I’ll suggest two. One is in my opinion that a first mover has no (direct) template, while the second mover has at least one, the third mover two, and so on. The second basic asymmetry is that the first mover faces less crowded market spaces in both product and factor markets (for better or for worse) than the second mover, which faces even more crowded market spaces than the third, and so on. The outcome of any first mover situation might then be seen as a consequence of how the size and direction of these basic asymmetries are shaped by resource heterogeneity, incentives and competitive behavior.

I guess the question I am airing is whether these two basic asymmetries would be the natural starting point if one would want to proceed in the manner outlined above?