Strategic Management Journal

Strat. Mgmt. J., 19: 1111–1125 (1998)

FIRST-MOVER (DIS)ADVANTAGES: RETROSPECTIVE

AND LINK WITH THE RESOURCE-BASED VIEW
MARVIN B. LIEBERMAN1* AND DAVID B. MONTGOMERY2
1
The Anderson School of Management, University of California, Los Angeles,
California, U.S.A.
2
Graduate School of Business, Stanford University, Stanford, California, U.S.A.

This article reflects upon and updates our prize-winning paper, ‘First-mover advantages,’ which
was published in SMJ 10 years ago. We discuss the evolution of the literature over the past
decade and suggest opportunities for continuing research. In particular, we see benefits from
linking empirical findings on first-mover advantages with the complementary stream of research
on the resource-based view of the firm.  1998 John Wiley & Sons, Ltd.

We were honored to receive the 1996 prize of Lieberman asked various colleagues for their
the Strategic Management Society (in cooperation interpretation of ‘first-mover advantages’ and was
with John Wiley & Sons) for our 1988 paper, surprised to find idiosyncratic responses spanning
‘First-Mover Advantages.’ It is customary for the an even wider range than what had surfaced in
award recipients to write a brief article reflecting our earlier discussions. It became clear that an
on the original work. As our paper aimed to effort to bring coherence and precision to the
provide a unified conceptual framework and criti- ‘first-mover’ concept would be helpful. We there-
cal assessment of the literature, we have chosen fore set out to write our journal article, designed
to write a somewhat longer piece to update our to assess the nature of first-mover advantages,
survey and suggest opportunities for continuing categorize the causal mechanisms, and draw
research. together a diverse set of relevant literature. We
Our prize-winning paper began as a series of received helpful input at a conference organized
healthy disagreements between the authors, which by Cynthia Montgomery in conjunction with the
took place over brown bag lunches during the first special issue of SMJ. In the years since
summer of 1986. ‘First-mover advantage’ (FMA) publication, we have been pleased to see our
was a term widely invoked in strategic man- article become a useful resource for business
agement, marketing, and economics. We found, scholars in several fields.
however, that our interpretations of the concept The literature on first-mover advantages has
differed greatly. We wondered if our disagree- expanded greatly since the publication of our
ments stemmed from the contrast in our discipli- paper a decade ago. Nevertheless, many of the
nary backgrounds, or if they reflected a broader fundamental conceptual problems that we dis-
lack of consensus among business scholars. cussed remain unresolved. We continue to be
During a sabbatical at Northwestern University, concerned that ‘as a focus for empirical research,
the concept of first-mover advantage may be too
general and definitionally elusive to be useful’
Key words: first-mover advantage; pioneer advantage; (Lieberman and Montgomery, 1988:52). How,
follower advantage; resource-based view; market entry then, might further work on this topic be pro-
* Correspondence to: Marvin B. Lieberman, The Anderson
School at UCLA, Box 951481, Los Angeles, CA 90095- ductive? We believe that the greatest opportuni-
1481, U.S.A. ties may lie in forging links with the complemen-

CCC 0143–2095/98/121111–15 $17.50 Received 19 June 1998

 1998 John Wiley & Sons, Ltd.
1112 M. B. Lieberman and D. B. Montgomery

tary body of research on the ‘resource-based view Two fundamental questions characterize the
of the firm’ (RBV). Historically, the RBV and interaction between resource accumulation and
FMA have evolved as prominent but independent the timing of market entry (see Figure 1). First,
research streams. Taken separately, each suffers under what conditions can early entry enhance
from serious deficiencies. We see a strong poten- the firm’s accumulation of superior resources
tial for synergy: the first-mover literature offers and capabilities? This is the primary question
empirical knowledge to fill major gaps in the considered in our survey article and in the FMA
resource-based view; and conversely, the frame- literature. A second question, less deeply
work of the RBV can aid the design of more explored, relates to the selection of pioneers vs.
sophisticated studies on the timing of entry. Our followers: Do the initial resources and capabili-
goal is to serve as marriage broker (or at least ties of a firm affect its optimal (and actual)
to initiate some serious dating). timing of entry?
The next part of this paper describes the links Our 1988 paper utilized terminology different
between first-mover advantages and the resource- from what has since become standard under the
based view of the firm. The last part of the paper RBV. The term, ‘resources,’ is now used to
updates our survey of the FMA literature. denote the firm’s stock of tangible and intangible
assets, including employees’ individual skills.
‘Capabilities’ or ‘competencies’ represent the
FIRST-MOVER ADVANTAGES AND organization’s collective capacity for undertaking
THE RESOURCE-BASED VIEW a specific type of activity. Our 1988 paper
referred to ‘assets’ (rather than ‘resources’) and
In recent years strategic management scholars ‘proficiencies’ (rather than ‘capabilities and
have expressed enormous interest in the resource- competencies’), but otherwise the paper fits
based view of the firm. A previous winner of the closely within the RBV framework. Below, we
SMJ best paper award, Birger Wernerfelt (1984), build upon our prior work to highlight the link-
was one of the first to articulate this perspective ages between first-mover advantages and the
on strategy. Later contributions include Barney RBV.
(1986), Rumelt (1987), Dierickx and Cool
(1989), Prahalad and Hamel (1990), Conner
Are resources and capabilities enhanced by
(1991), Amit and Schoemaker (1993), Peteraf
early entry?
(1993) and Teece, Pisano, and Shuen (1997),
among others. While our survey paper did not The bulk of the FMA literature focuses on the
explicitly recognize the resource-based perspec- potential for pioneering firms to acquire superior
tive, our main focus was on the dynamics of resources and capabilities. Early entry into an
resources and capabilities in the context of mar- emerging market may facilitate such accumu-
ket entry. lations. But pioneers often miss the best oppor-
The RBV has often been criticized for its lack tunities, which are obscured by technological and
of an empirical base, and particularly, of studies market uncertainties. In effect, early entrants may
that consider how resources and capabilities acquire the ‘wrong’ resources, which prove to be
evolve over time.1 Yet when the literature on of limited value as the market evolves.
first-mover advantages is repositioned within the Our survey paper argued that early entrants
boundaries of the RBV, the body of empirical may be able to preempt resources of various
research becomes vastly larger. Every applied types. These include superior positions in geo-
study of first-mover advantages provides evidence
on the accumulation of resources and capabilities
by market entrants. We believe that wider recog-
nition of this isomorphism may help to resolve
the empirical deficit faced by the RBV.

1
Porter (1991) gives such a critique. These deficiencies of
the RBV are increasingly being addressed; for example, see Figure 1. Interaction between entry timing and firm
Henderson and Cockburn (1994) and Helfat (1997). resources
 1998 John Wiley & Sons, Ltd. Strat. Mgmt. J., 19: 1111–1125 (1998)
 First-Mover (Dis)Advantages 1113

graphic space (e.g., prime physical locations), Resources and capabilities influence the
technology space (e.g., patents), or customer per- timing of entry
ceptual space. Pioneers may be able to expand
and defend their position by blocking product Faced with a decision about when to enter a new
space with a broadening product line. Preemption market, the optimal timing often depends upon
of superior human resources is also possible, the strengths and weaknesses of the firm’s exist-
but employee mobility makes such an advantage ing resource base. Our 1988 paper proposed that
difficult to sustain. pioneering is likely to be a desirable strategy for
Equally important but less widely recognized, firms whose relative skills are in new product
early entrants may be able to mold the cost development, whereas firms with relative
structure of customers. This can occur in three strengths in marketing and manufacturing may
main ways. First, there is evidence (e.g., Car- prefer to enter later, after the initial market and
penter and Nakamoto, 1989) that customers’ per- technological uncertainties have been resolved. In
ceptual space may evolve in a manner that favors many cases, the timing of entry may not be
the initial position of the pioneer. Second, cus- subject to managerial choice, as firms with
tomers may develop switching costs as they weaker innovative capabilities may be forced to
accumulate experience with the pioneer’s product. positions of late entry. Such entrants can prevail
Third, ‘network externalities’ may establish the if they hold valuable resources or capabilities
pioneer’s product as the industry standard. In the lacked by the pioneer. Moreover, later entrants
latter case, customers enjoy lower costs (or may be able to acquire pioneers, thereby linking
greater benefits) when using the standard product, their own resource base with the pioneer’s market
which allows compatibility with the largest base position, resources and skills.
of external users. (Here, the firm’s resource is In our 1988 survey we supported these argu-
the size of its customer base.) In all three cases ments with anecdotal evidence. In recent years a
it is interesting to note that the superior resources number of systematic studies have appeared.
do not reside within the pioneering firm; rather, These suggest that a firm’s resource base tends
they exist at the level of customers, whose prefer- to influence the likelihood and timing of entry,
ences have been shaped to favor the pioneer’s but in ways that are complex and still poorly
product. understood.
The mechanisms described above relate to pre- Moore, Boulding, and Goodstein (1991)
emption of resources. Early entrants may also extended the empirical model of Robinson and
gain a head start in developing a set of organi- Fornell (1985), allowing for the possibility that
zational capabilities that are key to the product market pioneering is endogenous (i.e., entry tim-
or service in question. In our 1988 article we ing is a choice variable of the firm). They
emphasized capabilities in manufacturing or mar- detected significant endogeneity, particularly in
keting, often referred to as learning or experience equations for market share.2
curve advantages. The ‘Yale appropriability sur- Robinson, Fornell, and Sullivan (1992) tested
vey’ (Levin et al., 1987) and its recent extension for differences in resources and capabilities
(Cohen, Nelson, and Walsh, 1997) show that among entrants at alternate stages of the industry
such learning and lead time advantages are typi- life-cycle. Their data sample included 171
cally more important than patents and other com- entrants, typically representing the diversification
monly recognized factors. efforts of Fortune 1000 firms. They found that
There is, nevertheless, no guarantee that these market pioneers had significantly different skill
potential advantages of pioneers will be sufficient and resource profiles than later entrants. As pre-
to ensure a strong position as the market evolves. dicted, firms with greater marketing skills and
Early entrants are often overtaken by competitors shared manufacturing tended to be followers, but
with more potent resources or capabilities. Ulti- surprisingly, R&D skills had no discernible effect
mately, the sustainability of a first-mover advan-
tage depends upon the initial resources captured
2
by the pioneer, plus the resources and capabilities Murthi, Srinivasan, and Kalyanaram (1996) later found that
after accounting for such unobserved, firm-specific factors
subsequently developed, relative to the quality of there remained a robust positive effect of pioneering on
resources and capabilities held by later entrants. market share.

 1998 John Wiley & Sons, Ltd. Strat. Mgmt. J., 19: 1111–1125 (1998)
1114 M. B. Lieberman and D. B. Montgomery

on entry timing. Moreover, the overall quality observed that the effects of entry timing on market
of resources did not differ substantially between share and survival differed substantially between
pioneers and followers, implying a lack of support industry incumbents and de novo entrants.
for our speculation that ‘first-movers may be Taken together, these findings suggest that the
intrinsically stronger or more proficient than later effects of incumbent resources on the likelihood
entrants.’ An opportunity remains to extend such and timing of entry are highly nonlinear with
analysis to include independent startup com- respect to the degree of radicalness of the new
panies. generation and the quality of incumbent resources
Recognizing that brand image is a key resource and capabilities. In general, though, the studies
for many established firms, Sullivan (1991) inves- suggest a high degree of incumbent inertia; i.e.,
tigated the entry order of brand extensions. She difficulty of transforming existing capabilities and
found that brand extensions tend to enter later developing a new resource base.
than new-name brands. Moreover, extensions of
brands with large customer bases typically enter
Linking the two research streams
later than extensions of brands whose base is
small. For brand extensions, later entry increases The above discussion has touched upon some
the likelihood of survival. These findings are salient connections between first-mover advan-
consistent with incentives to avoid damage to tages and the resource-based view of the firm,
brand equity, given that greater uncertainty exists which have coexisted as parallel but independent
during earlier stages of the market. research streams. We invite others to seize the
In an industry where a new product generation opportunity to further draw these streams
arises, the resource base of incumbents may affect together. The literature on first-mover advantages
the timing and success of their entry into the new provides a useful body of empirical knowledge
generation. Critical determinants are the degree of and a potential research agenda for the RBV.
product change between generations and the Moreover, we believe that researchers studying
extent to which existing resources and capabilities first-mover advantages should reposition their
have continuing value. Thomas (1995, 1996) work within the broad theoretical framework pro-
found that in the ready-to-eat cereal industry, vided by the RBV.
where most new product generations are
incremental, larger incumbents were typically the
first to enter. However, Henderson and Clark LITERATURE UPDATE
(1990) and Henderson (1993) assert that if the
shift to the new generation is radical enough, We now consider the literature on first-mover
incumbents will be hampered by their existing advantages that has emerged over the past decade.
capabilities; i.e., they will be unable to adapt.
Their argument is supported by evidence from the
Survey articles
photolithographic equipment industry. Similarly,
Christensen (1993) found a common pattern of Since the appearance of our 1988 paper, various
late entry by incumbents into new generations of other surveys of first-mover advantages have been
computer disk drives. published in the strategy and marketing literature
Mitchell (1989) considered entry into new (e.g., Kerin, Varadarajan, and Peterson, 1992,
technical subfields of the medical imaging indus- Robinson, Kalyanaram, and Urban, 1994, Kalyan-
try. He found a tendency for firms with industry- aram, Robinson, and Urban, 1995, Zahra, Nash,
specialized resources, such as distribution net- and Bickford, 1995, and Mueller, 1997). In
works, to enter earlier and with higher probability. addition, we published a chapter in the Handbook
Industry incumbents were more likely to enter of Business Strategy (1991), which gives case
early if their core products were threatened but examples to illustrate points raised in our 1988
their experience base retained its value in the
new technical area.3 Further, Mitchell (1991)
enter in one generation and contemporaneous with new
entrants in two others. In each generation the incumbents’
3
In a related study of product generations in the typesetter initial products were inferior, but the firms survived if their
industry, Tripsas (1997) found that incumbents were first to complementary assets retained value.

 1998 John Wiley & Sons, Ltd. Strat. Mgmt. J., 19: 1111–1125 (1998)
 First-Mover (Dis)Advantages 1115

SMJ article. We refer the reader to these surveys and an alternative to the loose methods commonly
but do not review them in any detail. used to identify market pioneers. Nearly all first-
mover studies have relied upon retrospective
assessments of entry order, which tend to omit
New methodologies
nonsurvivors. Further, in the case of the PIMS
data, this order is based upon self-reports that
Meta-analysis
the company was ‘one of the market pioneers.’
Vanderwerf and Mahon (1997) applied the tech- In an effort to overcome these problems, Golder
nique of meta-analysis to identify possible biases and Tellis selected 36 product categories and
in tests for first-mover advantages in published performed detailed analysis of historical infor-
empirical studies. Their data sample includes 90 mation in books and periodicals. They identified:
tests for first-mover advantages contained in 22 (1) the inventor (first to develop patent or
separate studies. They assessed whether the find- technologies), (2) the product pioneer (first to
ing of first-mover advantage (positive and sig- develop working model), and (3) the market
nificant, positive but not significant, negative) pioneer (first to sell new product), where the
was related to the methods employed in the orig- latter corresponds to the standard definition of
inal study. In particular, they investigated whether first-mover. Golder and Tellis found that market
findings were influenced by: (1) use of market pioneers had a failure rate of 47 percent. More-
share as the dependent variable, (2) industry se- over, the average market share of market pioneers
lection by the investigator (possible bias toward was only 10 percent, and their median period of
industries with stronger first-mover advantages), market leadership was only 5 years. By compari-
(3) failure to control for entrant capabilities, and son, firms that were early market leaders, but not
(4) omission of nonsurvivors. necessarily pioneers, had low failure rates (8%)
Vanderwerf and Mahon found an exceptionally and large average market shares (28%). Based
strong tendency to detect FMAs when market on these findings Golder and Tellis suggest that
share was the dependent variable, confirming the the first-mover advantages identified in many
concerns raised in our 1988 paper. They also prior studies are likely to be spurious, given
found significant effects for industry selection and that early market leaders are often misidentified
for the omission of controls for entrant capabili- as pioneers.
ties. Surprisingly, though, they did not find sig- Our examination of Golder and Tellis’ data
nificant evidence for survivor bias. Overall, their raises questions about how broadly new product
results suggest that the tendency of researchers categories should be defined. Products developed
to detect first-mover advantages may be affected by ‘inventors’ and ‘pioneers,’ as identified in
by methodology: for their sample of published their study, are often substantially different from
studies, the likelihood of observing a positive those of the early market leaders. For example,
relationship between pioneering and performance in the copier machine market they identify Xerox
was only 8 percent when none of the four as a later entrant, relative to 3M Thermofax,
research methods were used, rising to 99 percent which they designate as the product and market
when all four of the methods were used. pioneer. (An alternative view would be that
A further meta-analysis study by Szymanski, Xerox pioneered the plain paper copier market,
Troy, and Bharadwaj (1995) found FMA interaction whereas Thermofax pioneered the earlier gener-
effects to be more important than the main effect. ation of coated paper copiers.) While Golder and
One interpretation is that first-mover advantages are Tellis raise important points, we are not optimistic
moderated by differences in firms’ resources and that historical analysis can successfully eliminate
capabilities. Other recent studies in the marketing the subjective element that clouds much of the
literature have pointed to such interaction effects FMA literature.4
(e.g., Bowman and Gatignon, 1996).

Historical analysis 4
It would be interesting, nevertheless, to see more formal
sensitivity analysis of how findings of first-mover advantage
Golder and Tellis (1993) have proposed the may be affected by changes in the definition and breadth of
method of ‘historical analysis’ as both a critique product categories.

 1998 John Wiley & Sons, Ltd. Strat. Mgmt. J., 19: 1111–1125 (1998)
1116 M. B. Lieberman and D. B. Montgomery

more incremental. Our 1988 survey gives numer-

Survival analysis
ous links to the theoretical economics literature
In recent years, the field of population ecology applicable to first-mover advantages, but we note
has employed powerful statistical tools for exam- some important areas of continuing advance.
ining firm survival (Hannan and Freeman, 1989; ‘Network externalities’ and the establishment
Hannan and Carroll, 1992; Blossfeld and Rohwer, of product standards is one area where recent
1995). These tools have been used to assess progress has been substantial. The survey article
characteristics that may promote the survival of by Katz and Shapiro (1994) provides a guide
organizational populations (rather than individual to these developments. Related concepts of path
firms). Order of entry effects have been con- dependence and increasing returns are articulated
sidered only indirectly in the ecology literature; in Arthur (1989) and subsequent work.
for example, by testing measures such as popu- Our 1988 paper stressed the endogeneity of
lation density (number of competitors) observed entry timing and made a plea for theoretical
at the time of company founding.5 modeling of factors that may influence entry
While this population-level perspective differs order. Numerous studies of this sort have
from the firm-level focus of strategy and market- appeared in recent years, including Aron and
ing, the tools of hazard rate estimation are well Lazear (1990), Gabszewicz, Pepall, and Thisse
suited for evaluating the impact of entry order (1992), Dutta, Lach, and Rustichini (1995), and
on market survival. Indeed, we believe that Maggi (1996).
greater use of such tools by strategy researchers Increasingly, marketing scholars have con-
would denote a healthy shift away from the structed theoretical models relating to first-mover
excessive emphasis on market share in first-mover advantages (e.g., Fershtman, Mahajan, and
studies. A further opportunity exists for Muller, 1990; Carpenter and Nakamoto, 1990).
researchers in the field of organizational ecology Recent theoretical studies have considered how
to expand their perspective by more explicitly FMAs may depend upon the pioneer’s antici-
considering issues of entry order. pation of, and reaction to, subsequent entry
(Gatignon, Anderson, and Helsen, 1989; Shankar,
1997; Srinivasan and MacLaurin, 1998). This
Experimental studies
work leads to prescriptions regarding optimal stra-
Marketing scholars have increasingly turned to tegic defense by the industry incumbent. Other
experimental studies to explore how entry order theoretical models in the marketing field suggest
may affect the process of consumer preference that innovative late movers may be more prof-
formation (e.g., Kardes and Kalyanaram, 1992; itable than pioneers (e.g., Shankar, Carpenter, and
Carpenter and Nakamoto, 1994; Zhang and Mark- Krishnamurthi, 1998), a result that also arises in
man, 1998). Such work suggests that the order some of the economic models of endogenous
of product introduction may affect consumers’ entry timing. Such theoretical findings of ‘late-
memory, perception of features, and formation of mover advantage’ have received growing empiri-
judgments about competing brands. Experimental cal support (e.g., Schnaars, 1994; Berndt et al.,
studies offer a controlled setting for isolating and 1995; Zhang and Markman, 1998).
identifying these aspects of first-mover advantage.
Empirical evidence
Theoretical contributions
Numerous applied studies have been noted in the
The 1980s were a period of great advance in the previous sections of this paper. Table 1 summa-
field of theoretical industrial organization eco- rizes further evidence from recent empirical stud-
nomics as the insights of game theory were ies. We draw a number of general conclusions
brought to bear; since then, progress has been from this empirical work of the past decade:

1. Entry order effects exist, especially with

5
One exception is Barnett and Freeman (1997), who include respect to market share, but they are better
among their explanatory variables a count of the number of
times that the organization was the pioneering entrant into one specified as interactions than as direct effects.
of 80 new product categories in the semiconductor industry. 2. The magnitude of first-mover advantages var-
 1998 John Wiley & Sons, Ltd. Strat. Mgmt. J., 19: 1111–1125 (1998)
  1998 John Wiley & Sons, Ltd.
Table 1. Summary of recent empirical papers on first-mover advantage

Author Dependent variable Independent variable(s) Sample size Model/analysis Results

Meta-analysis
Vanderwerf and Mahon Sign and significance Use of research methods: 90 tests from 22 Meta-analysis Use of market share, sample
(1997) of tests for first-mover market share, sample studies selection, limited variables
advantage selection, survivor bias, overstates first-mover
limited variables advantage; survivor bias not
significant
Szymanski, Troy, and Market share Meta-analysis: omitted Meta analysis of prior Meta-analysis Order of entry exerts a
Bharadwaj (1995) variables, sample studies; 2746 SBU significant, positive direct
characteristics, measurement responses from the Test of framework: effect on market share, but
factors PIMS data base hierarchical regression order of entry may be best
Test of framework: analysis (HRA) modeled as an interaction
interaction and main effects effect rather than a main
effect

Pioneer skills
Murthi, Srinivasan, and Market share Order of entry, product 236 business units for Random intercepts Pioneering advantage is
Kalyanaram (1996) variables, marketing 3 years model/maximum significant even when
instruments, efficiency/skills likelihood managerial skills are included
Robinson, Fornell, and Order of entry Functional skills of entrant 171 companies Multinomial Market pioneers are different
Sullivan (1992) logit/maximum from later entrants but are
likelihood not intrinsically stronger

First-Mover (Dis)Advantages
Rao, Vakratsas, and Eq. 1: Relative Eqs. 1 and 2: Order of entry, 134 brands across 34 Three-equation system; Followers are more likely to
Kalyanaram (1998) positioning recency of the product product categories the follower’s strategy react by changing their entry
Eq. 2: Elapsed time category extracted from the is represented by the timing than by changing both
since last entry Eq. 3: Relative advertising, ASSESSOR data base first two equations. their entry timing and
Eq. 3: Relative market two entry variables: order of The third equation positioning.
share entry, entry time difference represents the market In recent categories followers
(elapsed time since last share penalty faced by enter more rapidly than in

Strat. Mgmt. J., 19: 1111–1125 (1998)

entry), relative positioning, a follower firm. The older product categories.
recency of the product system of equations is However, the reduction in
category estimated by nonlinear time of entry in recent
SUR product categories does not
completely overcome the
higher order-of-entry penalty
in these categories

1117
  1998 John Wiley & Sons, Ltd.

1118
Table 1. Continued

Marketing mix
Kalyanaram and Urban Market share Order of entry, price, 28 brands (average of Exponential model/ Later entrants have lower
(1992) Trial penetration position, marketing mix 69 weekly non-linear least squares asymptotic performance levels

M. B. Lieberman and D. B. Montgomery

Repeat purchase observations/brand) but approach them faster
Bowman and Gatignon Market share Marketing mix variables as a 5 product markets (2 Linear regression/ Marketing mix responsiveness
(1996) function of order of entry durable, 3 nondurable), weighted least squares decreases with order of entry;
55 brands, 3729 main effect of order of entry
observations not significant
Kalyanaram and Relative market share Marketing variables: price, Five packaged goods Log-linear Confirming previous studies,
Wittink (1994)) distribution, and advertising categories with 3–5 regression/OLS share is negatively related to
and promotion expenditures brands each (19 brands order of entry and time
(expressed as a ratio relative total); 220 weeks of between successive entries.
to the first entrant); entry data aggregated across However, the magnitude of
variables: order of and entry, eight cities for each the entry effects must be
time difference between category assumed to be specific to the
entrant i and entrant i−1 product category. In other
words, there is heterogeneity
in entry effects across
categories.
Nehrt (1996) Percentage growth in Timing and intensity of 50 chemical bleached Multiple Timing of pollution-reducing
real net income pollution-reducing pulp manufacturers in regression/OLS investments has a significant
investments, five control eight countries, positive impact on
variables: timing of including 19 companies performance. The effect of
regulation, growth in real from the U.S. environmental regulations is
GDP, growth in wages, log nonsignificant, which conflicts
of firm’s initial net income, with conventional wisdom
and growth in sales that more highly regulated
countries place their firms at
a competitive disadvantage

Strat. Mgmt. J., 19: 1111–1125 (1998)

Time-in-market
Brown and Lattin Market share Order of entry, time in Sample 1: 129 brands Regression/OLS Time in market is highly
(1994) market, marketing activity Sample 2: 40 regional significant—order of entry
markets advantage dissipates over
time
Huff and Robinson Market share Order of entry, lead time, 95 observations in 34 Log-linear Longer lead time increases
(1994) time of introduction (pre- or frequently purchased regression/OLS the pioneer’s advantage;
post-1960), years of consumer goods pioneer’s relative advantage
competitive rivalry categories (Urban et declines over time with
al., 1986 data) competition
  1998 John Wiley & Sons, Ltd.
Table 1. Continued

Author Dependent variable Independent variable(s) Sample size Model/analysis Results

Shankar, Carpenter, Brand sales Cumulative sales (long-term Data set from a Exponential An innovative late mover can
and Krishnamurthi asymptotic sales potential), prescription drug model/nonlinear least create a sustainable advantage
(1998)) cumulative sales of the market; each squares by: (1) enjoying a higher
closest competitor(s), own observation is market potential and a higher
journal advertising subscripted by a brand repeat purchase rate than
expenditure, own detailing i and month t; 124 either the pioneer or non-
expenditure, total marketing months, 8 brands innovative competitors, (2)
mix expenditures of the growing faster than the
closest competitor pioneer, (3) slowing the
pioneer’s diffusion, and (4)
reducing the pioneer’s
marketing mix effectiveness
Kerin, Kalyanaram, Brand trial penetration Marketing variables: price, Four packaged goods Log-linear The order-of-entry effect is
and Howard (1996) distribution, advertising categories with 3–5 regression/maximum greatest for a new product
expenditure, promotion brands each: 120 likelihood class pioneered by a brand
expenditures (ratio relative observations (cereal), extension. Order of entry has
to the first entrant); Entry 100 observations the least effect on a new
variables: order of entry, (juice), 100 product form pioneered by an
entry time difference from observations entirely new brand. Although
last entrant (ibuprofen), and 140 order-of-entry effects are

First-Mover (Dis)Advantages
observations significant, the effects of
(toothpaste) marketing mix variables such
as price and promotion are
stronger
Patterson (1993)) H1: Four performance H1: Industry age at time of 151 firms drawn from H1: Exponential OLS Statistically significant results
measures: industry entry six industries. The specification linearized of expected form for industry
share, net profit share, H2: Perceived height of performance measures by log transformation share and net profit share;

Strat. Mgmt. J., 19: 1111–1125 (1998)

return on sales, and temporal strategic barriers were taken from H2 and H3: return on sales and equity
return on equity H3: Exponential decay Standard & Poor’s Correlational analyses regressions not statistically
H2: Intercept of coefficient of the opportunity Industry Surveys and pairwise tests significant. Evidence that
‘opportunity curve’ curve function (1988) temporal strategic barriers
H3: Temporal strategic perform the function of
barrier height preserving benefit for early
entrants

1119
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1120
M. B. Lieberman and D. B. Montgomery
Table 1. Continued

New markets
Mascarenhas (1992a,b) Market lag Market characteristics 8000 rig-year Survival data Pioneer market share
Order of entry Firm characteristics observations analysis/maximum advantage is larger than
Market share, entrant Order of entry (international) likelihood found in U.S. samples
life regression/OLS

Tufano (1989) Securities underwriting Pioneer vs. imitator 1944 publicly Linear regression/OLS Pioneers capture larger
spreads underwritten offerings Univariate analysis and market share than imitators,
Market share of based on 58 financial comparison but are not able to charge
securities offerings innovations higher prices (spreads)

Brand retrieval
Kardes et al. (1993) Brand retrieval Pioneer, brand attributes, 18 brands Sequential Brand retrieval and
Brand consideration size of retrieval and 115 subjects logit/maximum consideration process
Brand choice consideration sets likelihood contributes to the pioneering
advantage
Alpert and Kamins Brand retrieval, recall, Pioineer vs. follower brands 366 consumer survey Univariate analysis Pioneers generate positive
(1995) attitude and purchase respondents and comparison attitudes and purchase
behavior intentions, but retrieval and
recall were not as favorable

Strat. Mgmt. J., 19: 1111–1125 (1998)

 First-Mover (Dis)Advantages 1121

ies greatly across product categories and geo- are partly based upon the outcome of competition
graphic markets. (as a result of the evolution of consumer prefer-
3. First-mover advantages dissipate over time but ences with experience). They conclude that com-
are enhanced by longer lead times before com- petition between pioneers and followers may be
petitive entry. seen as a race to gain advantage by shaping the
4. Entry order effects, although significant and nature of consumer preferences.
robust, are weaker than ‘marketing mix’ Building on this insight, several researchers
effects related to price and advertising. Later have sought to integrate psychological under-
entrants can utilize this result to catch up to standing of pioneering and choice within a cogni-
and surpass pioneers. tive economics approach. Kardes and Kalyanaram
(1992) found for consumer packaged goods that
Selected empirical studies on international and consumers learn more about a pioneer than about
consumer behavior aspects of FMAs are dis- later entrants, thereby giving rise to robust first-
cussed below. mover advantages, and that these advantages
increased over time, especially when consumers
were reminded of the pioneer product’s features.
International/global
Kardes et al. (1993) found that pioneering brands
The empirical evidence relating to first-mover were more likely to be retrieved from memory,
advantages is drawn largely from the United considered for choice, and actually chosen. Simi-
States. We believe that more research is needed larly, Alpert and Kamins (1995) found that con-
on the applicability of such first-mover results to sumers have a positive attitude toward pioneer
other national environments. The few comparative brands. Muthukrishnan (1995) adds to these
studies performed to date suggest that inter- empirical results the notion that decision ambi-
national differences are substantial. Song and Di guity creates an advantage for the incumbent
Benedetto (1996) found that managerial percep- brand, thereby enhancing first-mover advantages.
tions of first-mover advantages differ greatly These findings suggest that considerable first-
across countries. Alpert et al. (1996) observed mover advantages may result from consumer cog-
that more than half of the products offered by nitive processes.
Japanese suppliers to supermarket retailers were
pioneering brands, as compared with only 14
Case studies
percent of the products offered by comparable
U.S. suppliers. The latter findings suggest that Finally, several recent studies have focused on
the Japanese market is more innovation oriented, first-mover effects in specific industries or mar-
thereby rendering first-mover advantages more kets. These include financial products (Tufano,
important. 1989), ethical drugs (Shankar, Carpenter, and
Nakata and Sivakumar (1997) provide a theo- Krishnamurthi, 1998), bleached pulp (Nehrt,
retical analysis of how the characteristics of 1996), and offshore oil rigs (Mascarenhas,
emerging national markets are likely to affect 1992a,b).6 In addition there have been some
first-mover advantages. Mascarenhas (1992a,b), descriptive case studies on the frozen food indus-
in an analysis of international markets for semi- try (Geroski and Vlassopoulos, 1991; Sutton,
submersible oil-drilling equipment, found an 1991) and the VCR industry (Rosenbloom and
intermarket impact of pioneering that was greater Cusumano, 1987; Cusumano, Mylonadis, and
than the intramarket effect. This suggests that in Rosenbloom, 1992). A recent assessment of
some industries it may be important to pioneer dominant firms (Rosenbaum, 1998) found first-
simultaneously in many national markets, rather movers in four out of 10 industries. Many of
than to pioneer within each market sequentially these studies provide rich detail on entrant charac-
over time. teristics and market evolution.

Consumer behavior
6
In their prize-winning article in the Journal of Historical studies covering multiple product generations
within an industry, as described earlier in this article, include
Marketing Research, Carpenter and Nakamoto Mitchell (1989), Henderson (1993), Christensen (1993), and
(1989, 1994) suggest that consumer preferences Tripsas (1997).

 1998 John Wiley & Sons, Ltd. Strat. Mgmt. J., 19: 1111–1125 (1998)
1122 M. B. Lieberman and D. B. Montgomery

CONCLUSIONS managerial prescriptions apply with regard to

FMAs and the optimal timing of entry. More
What then are the research opportunities in the research is needed on the strategic choices
first-mover area as the new millennium that pioneers and followers should make under
approaches? In our view some of the important different environmental conditions. Cross-
issues for future research are as follows: fertilization between strategy and marketing
should be particularly fruitful here.
1. We have suggested that the resource-based
view (RBV) and first-mover advantage (FMA) We conclude with a call to researchers in both
are related conceptual frameworks that can strategy and marketing to increasingly monitor
benefit from closer linkage. The findings of the other’s literature. In writing our 1988 paper
FMA studies on resource accumulation by we found that our different backgrounds strongly
early entrants can help to overcome the empiri- complemented each other. Our receipt of the SMJ
cal deficit of the RBV. Moreover, we believe best paper prize suggests that great benefits can
that FMA research can be strengthened if posi- arise from such interdisciplinary collaboration.
tioned within the broad theoretical perspective
of the RBV.
2. As we noted in our original paper, the endog- ACKNOWLEDGEMENT
eneity of entry order is an important issue to
be investigated. The theoretical literature has The assistance of Dana MacLaurin, PhD candi-
moved forward in this regard, and there has date at the Stanford Graduate School of Business,
been a small amount of empirical research. is gratefully acknowledged.
A continuing challenge is to understand the
determinants of entry order and lead times
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