The Myth of First Mover Advantage

Abstract

Conventional wisdom would have us believe that it is always beneficial to be first – first in, first to market, first in class. The popular business literature is full of support for being first and legions of would-be business leaders, steeped in the Jack Welch school of business strategy, will argue this to be the case. The advantages accorded to those who are first to market defines the concept of First Mover Advantage (FMA). We outline why this is not the case, and in fact, that there are conditions of applicability in order for FMA to hold (and these conditions often do not hold). We also show that while there can be advantages to being first, from an economic perspective, the costs generally exceed the benefits, and the full economics of FMA are usually a losing proposition. Finally, we show that increasingly, we live in a world where FMA is eclipsed by innovation and format change, rendering the FMA concept obsolete (i.e. strategic obsolescence).