Sustainable Pioneering Advantage? Profit Implications of Market Entry Order

Journal Article

There is strong theoretical and empirical evidence supporting the idea that "first-tomarket" leads to an enduring market share advantage. In sharp contrast to these findings, we find that at the business unit level being first-to-market leads, on average, to a long-term profit disadvantage. This result holds for a sample of consumer goods as well as a sample of industrial goods and leads to questions about the validity of first mover advantage, in and of itself, as a strategy to achieve superior performance. We replicate the typical demand-side pioneering advantage but find an even greater average cost disadvantage, which is the source of the pioneering profit disadvantage. In an extended analysis, we show that first-to-market leads to an initial profit advantage, which, depending on the sample or profit measure, lasts for about 12 to 14 years before turning into a disadvantage. Moreover, we show that pioneers differentially benefit from a lack of consumer learning, a strong market position and patent protection. These three moderating factors together can actually help pioneers achieve a sustainable profit advantage over later entrants. Finally, we find strong support for the theoretical argument that the entry order decision should be treated as endogenous in empirical estimation.

Duke Authors

Cited Authors

  • Boulding, W; Christen, M

Published Date

  • 2003

Published In

  • Marketing Science

Volume / Issue

  • 22 / 3

Start / End Page

  • 371 - 392+435