Sustainable Pioneering Advantage? Profit Implications of Market Entry Order

Boulding, William; Christen, Markus
June 2003
Marketing Science;Summer2003, Vol. 22 Issue 3, p371
Academic Journal
There is strong theoretical and empirical evidence supporting the idea that "first-to-market" 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.


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