First-mover Advantage Revisited: A Systematic Review and Directions for Future Research Rikiya Tsuchihashi

KEIEI TO KEIZAI, Vol. 95 No. 1¥2, September 2015 45

First-mover Advantage Revisited: A Systematic Review and Directions for Future Research

Rikiya Tsuchihashi

Abstract

The relationship between order of entry and firm performance has gained increased attention in the last two decades. Despite the surge in empirical research, the order of entry effect still has many unaddressed issues. To fill the gap, we conduct a systematic literature review. We systematically selected 119 empirical papers, and shortlisted 20 papers matching our selection criteria. We find that (1) the effect of First- mover advantage (FMA) differs depending on the performance meas- ure, especially when market share is used as a dependent variable; (2) FMA does exist but depends on internal firm resources and the external environment.

Keywords: First-mover advantage; systematic review; entry timing

１．Introduction

The relationship between order of entry and firm performance has

gained increased attention in the last two decades. Decisions about the time

of entry are considered a key factor for building a competitive advantage in

strategic management and marketing research. Since the work by Lieber-

man and Montgomery (1988)， many scholars have conducted empirical

research using large samples ( Bowman and Gatignon ， 1996; Tufano ， 1989;

46 KEIEI TO KEIZAI

Urban et al .，1986)， qualitative case studies ( Golder and Tellis ，1993;

Tellis and Golder ，2002)， and theoretical approach ( Finney, Lueg, and Campbell ，2008)． Especially, there has been a rise in empirical studies based on new methodologies, focusing on the impact of the differences in en- vironment for every company ( Suarez and Lanzolla ，2007)， and the in- fluence of speed capabilities on entry to new markets ( Hawk et al .，2013)．

Despite the surge in empirical and theoretical research, the order of en- try effect still has many unaddressed issues ( Fosfuri, Lanzolla, and Suarez ， 2013)． In addition, while a large volume of empirical work has been con- ducted, the review literature summarizing and critically assessing the empir- ical findings has been scant, especially since the late 1990 s. This paper exa- mines the extent to which results gained from empirical studies in the past 15 years have changed compared to those obtained from studies conducted in the early 1990 s. We focused on the following two questions: ( i ) whether the difference in entry timing measure as an independent variable affects the first-mover advantage ( FMA ); and ( ii ) whether the difference in firms' en- vironmental conditions ( industry / institution ) affects FMA.

With the aim of enhancing the accuracy of review, we opted for a sys-

tematic review instead of the traditional narrative review. Narrative review,

commonly used in management research and a somewhat primitive method

of reviewing, has methodological problems when it comes to sample selec-

tion. A systematic review can avoid sampling biases, as samples are selected

according to a set of clear criteria. We systematically selected 119 empirical

papers from the SciVerse Scopus database, and shortlisted 20 papers match-

ing our selection criteria. We assessed these 20 papers in terms of their ana-

lytical methods, industry-wise difference, and FMA support rate. We ex-

plore how the empirical literature on FMA has advanced in the last 15 years.

First-mover Advantage Revisited: A Systematic

Review and Directions for Future Research 47

Lastly, we suggest directions for future research ．

２． First-mover advantages and disadvantages

Lieberman and Montgomery (1988) have summarized FMA in a com- prehensive manner. Their paper, considered pivotal research on FMA, was awarded the Best Paper prize by the Strategic Management Society in 1996．

Lieberman and Montgomery (1988) highlighted certain first-mover advan-

tages and disadvantages. The advantages are ( i ) technological leadership ;

( ii ) preemption of scarce assets ; and ( iii ) switching costs and buyer choice

under uncertainty. Technological leadership is obtained by capitalizing on

the learning curve and patents. Preemption of scarce assets means that the

first mover makes more profit than followers due to the preemption of

scarce resources. For example, the preemption of input factors and locations

in terms of geography and product characteristics prevents followers from

entering the market. Switching costs and buyer choice under uncertainty

means that followers have to make additional investments to gain new cus-

tomers when such switching costs exist. When customers have to make a de-

cision under uncertainty, they tend to buy the pioneer's products. While

pioneering a market increases a firm's profit, there are certain disadvan-

tages as well. The first is the free-rider effect, which means that the late-

mover might be able to free-ride on the pioneering firm's investments,

such as R&D, buyer education, and infrastructure development. Followers

can imitate the pioneer's innovation at a lower cost. The second drawback is

the resolution of technological or market uncertainty, which means that fol-

lowers can gain profits when market uncertainty ends; entry in uncertain

markets involves a high degree of risk. The third disadvantage is the shift in

48 KEIEI TO KEIZAI

technology or customer needs, which means that incumbent firms may not be able to respond to the discontinuous innovations by new entrants, and thus may lose their position as market leader. The fourth drawback is in- cumbent inertia, which means that the lock-in effects and cannibalization of existing products impede the incumbents from responding to environmen- tal change.

Pioneers can hold on to market share until other competitors enter the market. In a monopolistic scenario, the pioneer's market share is always 100 percent. However, as other rivals enter the market, the pioneer's market share decreases. According to Urban et al . (1986)， the market share of the pioneer drops from 100 percent to 27 percent after five rivals have entered the market. Urban et al . (1986) demonstrate that, in general, the market share relative to the pioneering brand is as follows : 1.0 for first ; 0.71 for se- cond ; 0.58 for third ; 0.51 for fourth ; 0.45 for fifth ; and 0.41 for sixth.

Robinson and Fornell (1985) analyzed the effect of pioneering on market share using data from the consumer goods industry and found that the order of entry was linked to market share. The source of pioneering-related advan- tages is firm-based superiority.

2.1 Past systematic assessment of FMA

Empirical research has been on the rise since the seminal work by Lie- berman and Montgomery (1988)． However, this spike in interest triggered variationsin the empirical results and created confusion about the effect of entry timing on performance. At the same time, in the mid ‑90 s, some resear- chers conducted narrative and systematic reviews of entry timing effect. We present the findings of these review articles.

Vandewerf and Mahon (1997) conducted a meta-analysis of 90 statisti-

First-mover Advantage Revisited: A Systematic

Review and Directions for Future Research 49

cal analyses extracted from 22 empirical papers about first-mover advantage.

In their research on FMA, scholars have used a variety of methods and vari- ables and have tested whether the differences in the methods and variables among papers affect the existence of FMA. Of 90 tests ，71 indicated a posi- tive relationship between the early entrant and performance, and 54 tests delivered statistically significant results. However ，19 out of the 90 tests in- dicated a negative relationship, and seven tests were statistically significant.

Research that uses market share as a firm's performance variable may sup- port FMA more strongly than research that uses survival rate or profit rate.

Kalyanaram, Robinson, and Urban (1995) suggested empirical generali- zations in four parts : ( i ) in a market featuring mature consumer goods and industrial goods, the order of market entry and market share have a negative relationship ; ( ii ) for consumer-packed goods and prescription anti-ulcer drugs, the market share of entrants divided by the market share of first en- trants nearly equals one divided by the square root of the order of market en- try ; ( iii ) the technology and resource profile of pioneers is different from that of followers and late entrants ; and ( iv ) entry order is not related to the long-term survival rate. Based on these four empirical generalizations, the authors concluded that a firm should possess appropriate technologies and resources in order to gain FMA.

Szymanski, Troy, and Bharadwaj (1995) conducted a meta-analysis of

23 papers on the relationship between order of entry and market share. The

results were as follows. First, on average, entering early in a market has a

significantly positive effect on market share. Second, omitting breadth of

product line and marketing expenditure from the analysis model, using SBU

as an analysis unit rather than brand, and assessing order of entry using the

variable of first mover rather than entry order strengthened the effect of

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FMA.

Szymanski et al . (1995) conducted a meta-analysis from the contingen- cy perspective. The authors analyzed whether entry order exerted a direct impact on business performance, considering market strategy variables ( e . g., breadth of product line, product customization, product quality ) and mar- ket place factors ( e . g., market growth, consumers' purchase frequency )．

According to their analysis, the relationship between entry order and perfor- mance can be assessed accurately by using a model that includes interaction effects, while service quality, vertical integration, R&D expenditure, shared facilities and customers, market growth rate, and consumers' purchase fre- quency are factors that enhance the effect of FMA. Meanwhile, a shared marketing program weakens the impact of FMA. These results indicate that entering early is not automatically associated with high performance;

however, the mix of marketing strategy variables and market place factors affects market share.

Robinson, Kalyanaram, and Urban (1994) reviewed the literature on FMA and found that being a pioneer does bring benefits in spite of the costs and risks involved, and suggested that not only entry timing but also the lead time between the first entrant and second entrant is important for FMA.

Lieberman and Montgomery (1998) drew some findings from past em-

pirical work. First, the entry order effect does exist, especially for market

share; however, this effect is better understood as an interaction than as a

direct effect. Second, the effects of entry order differ according to product

categories and geography. Third, FMA disappears over time. However, lon-

ger lead times of rivals entering the market enhance FMA. Fourth, although

entry order effects are significant and robust, these effects are weaker than

the effect of the marketing mix associated with price and advertising.

First-mover Advantage Revisited: A Systematic

Review and Directions for Future Research 51

Later entrants have opportunities to catch up to and surpass pioneers by leveraging these effects.

We summarize the past narrative and systematic review articles as fol- lows:

(1) The existence of FMA depends on the analytical methods. In particular, empirical research that employs market share as a dependent variable tends to support FMA more strongly than does research employing other variables ( e . g., profit rate or survival )．

(2) The existence of FMA depends on the internal and external environ- ment. Especially, internal marketing resources or strategy and external environmental conditions affect firm performance.

３．Methods

As discussed above, entering early has advantages as well as disadvan- tages. Many scholars have conducted empirical research to determine whether first movers can increase profits. We conducted systematic research on these empirical studies to confirm FMA.

Systematic review, as distinct from the traditional narrative review ,

is a review of the literature based on a systematic protocol ( Chalmers and

Altman ，1995; Tranfield et al .，2003)． Narrative review and systematic

review differ in several ways ( Cook et al ．1997): Systematic review focuses

on narrower research questions. In a systematic review, authors select

research samples based on a specified protocol. Traditional narrative review

may suffer sampling bias because researchers intentionally choose the

research for their study purposes. Systematic review is a more sophisticated

method of judging the results of previous studies ( Mulrow ，1994)．

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We used SciVerse Scopus, the largest abstract and citation database of peer-reviewed literature, for our systematic review. SciVerse Scopus con- tains 5,300 humanities and social sciences journals. Unlike Tranfield et al . (2003)， who recommended the collection of broad items, our research does not include certain papers, such as unpublished papers and conference proceedings. We chose only academic refereed journals because such jour- nals guarantee the quality of research ( Keupp ，2012).

We searched and abstracted empirical literature on FMA from SciVerse Scopus. The search words and protocol were in line with Szymanski et al . (1995):

(1) We searched SciVerse Scopus using five terms ( first-mover advan- tage , pioneer advantage , order of entry , timing of market en- try , pioneering effort )．

(2) We selected the articles that included at least one of these five terms in their title.

(3) We searched the articles published between 1995 and 2012; we began in 1995 because a systematic review has not been conducted since this year. We obtained 119 search results.

(4) We read the abstracts and contents of the 119 papers and selected the articles that focused on the relationship between entry timing and per- formance. We thus obtained 20 articles.

４．Results

Table 1 summarizes the results of the 20 empirical studies abstracted according to the above protocol. Does the effect of FMA depend on the differences in (1) measures of performance as a dependent variable and (2)

measures of entry timing as an independent variable ?

Fi rs t-mo v e r A d v a n ta g e R e v is ite d : A S y ste ma tic Rev iew and D ir ect ions for F u tu re R e sear ch 53 Table 1． Summary of past empirical research

Researchers Data Dependent

variables

Independent

variables Results FMA Journal

Jakopin and Klein (2012)

191 mobile network operators from 49 countries

Market share EBITDA

Entry position ( time lag ) Entry position ( rank ) Incumbent

Both first-movers and incumbents in the mobile telecommunications service industry are more successful in terms of market share and EBITDA than late entrants or greenfield companies ．

◎ Journal of Busi- ness Research

Magnusson et al ．(2012)

178 advertising subsidiaries in Eastern Europe (17 countries );

134 advertising subsidiaries in the Middle Eastern and African markets (18 countries )

Market share

Entry order lag Entry order lag

× urban growth Entry order lag

×political instability Entry order lag

×economic openness

Early entrants outperform later entrants in both geographic regions, and the first-mover effect is moderated by environmental dynamics ． Specifically, early entry is more likely to lead to sustainable competitive advantage in markets characterized by political stability and limited economic integration．

◎

Marketing Management Journal

Murray, Ju, and Gao (2012)

25,513 foreign firms operating in China

Market share Firm survival

Early entrants Lag time

Early entrants enjoy higher market share but suffer from lower survival rate than late entrants ．

△

Journal of In- ternational Marketing

Ghosh (2011)

44 banks ( service firms ) and 50 pharmaceutical companies ( manufacturing firms ) in India

Profit after tax

Order of entry firm size marketing intensity Order of entry

× Firm size Order of entry

× Marketing intensity

First-mover advantages exist for manufactur- ing firms but such advantages do not get trans- lated for service sector firms.

Moderating effects of firm size and marketing intensity are found to exist only for manufactur- ing firms．

△

Romanian Jour-

nal of Market-

ing

54 KEIEI T O K EI ZAI

Kim and Lee (2011)

6,605 Korean manufacturing fims that existed between 1989 and 2005

Market share Market share growth

Entry order ( second, third, late ) Entry lag and entry gap High R&D High advertising

Early entrants, including first movers, have higher market share, except in regimes with high technological opportunity and low R&D appropriability D

¢

Industrial and Corporate Change

Wang, Chen , and Xie (2010)

45 product categories ( e.g., computer hardware, computer software, consumer electronics, and telecommunica- tion equipment ) affected by network effects

Survival

Entry order ( whether pioneer or not ) Extent of network effects Cross-generation incompatibility Within-generation incompatibility

In markets with strong network effects, a pioneer has longer survival duration than early followers if the pioneer is cross-generation compatible but not within-generation compatible D

In markets with weak network effects, a pioneer has longer survival duration than early followers if the pioneer is within-generation compatible but not cross-generation compatible D

¢ Journal of Mar- keting

Balaji (2009)

1780 firms across 20 industries in the manufacturing sector in India

Average sales Average market share

Entry order ( early entrants or late entrants )

Early entrants hold an average market share of 1.1÷C while late entrants hold 0.05÷D 

The IUP

Journal of

Management

Research

Fi rs t-mo v e r A d v a n ta g e R e v is ite d : A S y ste ma tic Rev iew and D ir ect ions for F u tu re R e sear ch 55

Magnusson, Westjohn, and Boggs (2009)

379 subsidiaries in 43 developing markets across Eastern Europe, Asia, the Middle East, Africa, and Latin America

Market share

Entry order lag Entry order lag

~ firm size Entry order lag

~ international experience depth Entry order lag

~ international experience breadth Entry order lag

~ majority ownership Entry order lag

~ GDP growth Entry order lag

~ GDP growth per capita

Multinational service firms that are early en- trants into developing markets have greater long-term market share than late entrants D International experience moderates the relationship between entry order and market share D

Late entrants using a local partner can negate some of the late-entrant disadvantages D Greater individual wealth and economic growth would reduce early entrant's ability to generate FMAs D

¢

Journal of In- ternational Marketing

Fernandez and Usero (2007)

61 firms providing mobile telecom- munications services in the EU, Norway, and Switzerland D

Market share erosion ( ratio of the market share of the follower firm to that of the first mover )

Order of entry ( second, third, fourth c) Time in market Number of pioneers Pioneers' experience Number portability

An order-of-entry advantage does exist, but this advantage diminishes with time due to competition D

It is harder for follower firms to erode first-mover advantages when the pioneer has prior experience in the industry .

Number portability between different operators was found to damage the competitive position of the pioneer firms D

¢ Service Busi-

ness

56 KEIEI T O K EI ZAI Rodr რguez-

Pinto, Guti áe rrez- Cill áe n, and Rodr რguez- Escudero (2007)

136 product launches by Spanish manufacturing firms

Product's sales and

profitability relative to competitors

Order of entry ( pioneer, one of the pioneers, early follower, late entrant ) Scale of entry R&D resources Marketing resources

Entering the market early leads to a stronger competitive position D

The positive outcomes of early entry may be invalidated if the pioneering firm has poor R&D resources D

¢

European Jour- nal of Market- ing

Mittal and Swami (2004)

394 companies across 32 industries ( consumer goods industries and industrial goods industries ) in India

Average market share Average sales Average profit before tax Average return on investment

Entry order ( pioneers or followers )

In general, the pioneers perform better than the followers, and firms that enter early into the market have larger sales, market share, and profits than followers D

 Vikalpa

Boulding and Christen (2003)

PIMS database (363 business units of consumer goods, 858 business units of industrial goods )

Net income ROI

Pioneer (1 or 0)

On average, first-to-market leads to a long-term profit disadvantage relative to later entrants D In both industries, pioneering leads to an initial profit advantage that erodes over time . The advantage lasts for about 12 to 14 years D The moderating effects tend to be stronger for the consumer goods sample, where limited customer learning, a strong market share position, or patent protection can eliminate the long-term profit disadvantage and even lead to a sustainable pioneering profit advantage D

¢ Marketing

Science

Fi rs t-mo v e r A d v a n ta g e R e v is ite d : A S y ste ma tic Rev iew and D ir ect ions for F u tu re R e sear ch 57 Lopez and

Roberts (2002)

Financial services industry ( pension funds, credit cards, debit cards ) in Costa Rica

Market share Entry order Elapsed time

In pension funds, an early entrant gained a maximum market share over time D

In credit cards and debit cards, the pioneer does not have any advantage D

¢ Journal of Busi- ness Research

Isobe, Makino, and

Montgomery (2000)

Survey data from over 220 Sino-Japanese joint ventures in China

Perceived economic performance Employee retention likelihood Overall satisfaction

Strategic importance Extent of a Japanese parent's control Availability of supporting infrastructure Resource commitment to technology transfer Timing of entry

The greater the resource commitment to technology transfer, and the faster the entry, the more likely it was that joint ventures attained superior economic performance D



Academy of Management Journal

Pan, Li, and Tse (1999)

14,466 foreign firms in China

Market share ROA

Early entrants ( whether first to enter ) Lead time

Early entrants have significantly higher market share and profitability than late entrants D 

Journal of In-

ternational

Business Stu-

dies

58 KEIEI T O K EI ZAI

Song, Benedetto, and Zhao (1999)

Survey data from 2,419 firms (1,437 manufacturing firms and 982 service providers ) in 9 countries

Market share

ROI Pioneering

Managers from all countries perceive pioneering as something that is associated with higher market share and / or profitability . Manufacturing firm managers perceive pioneering risks to be significantly more important ; this is not often seen among service firm managers D



Strategic Management Journal

Luo and Peng (1998)

Test 1: 31 foreign-invested ventures operating in the Jiangsu Province in China D

Test 2: Mail survey ( a random sample of

foreign-invested firms that had been operating in China for at least eight years, N 96)

Test 1:

ROI Sales growth Asset turnover Risk

Test 2:

After-tax returns on sales After-tax returns on equity Sales growth Asset turnover Competitive position Level of operational risk

Time lag ( elapsed time from 1979)

The existence of significant first-mover advantages, and the risk-return tradeoff between the first-mover and late-mover strategies .



Thunderbird

International

Business Rev-

iew

Fi rs t-mo v e r A d v a n ta g e R e v is ite d : A S y ste ma tic Rev iew and D ir ect ions for F u tu re R e sear ch 59 Makadok

(1998)

1,015 funds in the money market mutual fund industry

Price

Market share Entry timing

First-mover and early-movers both enjoy a highly sustainable pricing advantage and a moderately sustainable market share advantage D



Strategic Management Journal

Mascarenhas (1997)

187 firms entering in 68 international markets for four off-shore drilling products .

Market share Market mortality

First entrant Early followers ( second and third ) Later entrants ( fourth and later )

First entry results in higher long-term interna-

tional market share and market survival D  Journal of Busi- ness Venturing

Murthi, Srinivasan, and Kalyanaram (1996)

PIMS database Market share ROI

Pioneer Early follower Relative product efficiency Relative marketing efficiency

After controlling management skills ( production efficiency and marketing efficiency )C the effect of pioneering on market share remains robust D



Journal of Mar-

keting

Research

60 KEIEI TO KEIZAI

First, the results indicate that entry order effects exist, especially when market share is used. Table 2 shows that the difference in dependent varia- ble affects FMA. To assess these effects, we collected tests on the entry ord- er effect from 20 papers. We counted the number of tests as follows. For ex- ample, if a paper contained three models for examining the effect of entry order on performance, we counted them as three tests. The number of tests is usually bigger than the number of papers because a paper typically con- ducts empirical tests by using more than two models.

Table 2． Performance variables and first-mover ( dis ) advantages Market

share Profit rate Survival Accounting profit

Subjective

data Total

First-mover

advantage 14 6 3 3 4 30

First-mover

disadvantage 3 3 1 3 2 12

Total 17 9 4 6 6 42

Support rate 82.4％ 66.7％ 75.0％ 50.0％ 66.7％ 71.4％

The 20 papers that are part of our research contain 42 tests. Of these ， 17 (40％) employ market share as a dependent variable, and 14 tests (82％) are statistically significant. On the other hand, the support rate for profit rate is 67 percent ( six out of nine tests )， the survival rate is 75 percent ( three out of four )， and accounting profit is 50 percent ( three out of six )．

This indicates that using market share tends to support FMA.

Murray et al . (2012) observed that the first entrant to a market in China

gained higher market share than its followers. Mascarenhas (1997) demon-

strated that first entry in international markets for four off-shore drilling

First-mover Advantage Revisited: A Systematic

Review and Directions for Future Research 61

products resulted in higher long-term international market share and market survival. Pan, Li, and Tse (1999)， using information about 14,466 foreign firms operating in China, observed that early entrants enjoy higher market share and ROA than later entrants. Although these studies support FMA, Kim and Lee (2011) demonstrate that there is no relationship between entry timing and market share in regimes with high technological opportunity and low R&D appropriability, such as for Korean manufacturing firms that exist- ed between 1989 and 2005.

Next, we assess the measures of entry timing as an independent varia- ble. The variable of entry timing can be divided into two measures: entry order and entry lag. Entry order is the most intuitive measure, counted as first, second, third, fourth, and so on. The other measures of entry order are category, which forms groups such as early entrants, followers, and late en- trants ( Rodriguez-Pinto et al., 2007， Murthi et al., 1996)， and a dichoto- mous measure, such as pioneer or not ( Wang et al., 2010; Boulding and Christen ，2003)．

Entry lag is late entrants' time delay after the early entrants have en- tered a specific market. Traditional empirical research, especially that based on PIMS data, tends to use entry order as an independent variable ( e.g., Lambkin ，1988; Robinson and Fornell ，1985)． However, the variable of time lag has often been used since 2000 ( e . g., Lopez and Roberts ，2002;

Fernandez and Usero ，2007; Magnusson et al., 2009; Kim and Lee ，2011;

Murray et al., 2012; Jakopin and Klein ，2012)． In the empirical results ob-

tained from our review, both entry order and entry lag support FMA. These

results indicate that the manner of measuring entry timing does not impact

performance.

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4.1 Characteristics of data

The empirical studies conducted in the late 1980 s and early 1990 are centered largely on the United States ( Lieberman and Montgomery ，1998)．

However, since the late 1990 s, data collected from all over the world have been used in FMA research. In addition, while prior research focuses on the manufacturing industry, the interest of recent papers has been the service sector that does not shed light on prior studies. Tests of entry timing effects have spread to various countries and industries.

The data used in the 20 empirical studies were of two types : (1) data on emerging markets, and (2) data on the service industry, rather than the manufacturing industry ．

Of the 20 papers ，11 analyzed emerging markets such as Eastern Eu- rope ( Magnusson et al., 2012)， China ( Murray et al., 2012; Isobe et al., 2000;

Luo and Peng ，1998)， India ( Ghosh ，2011; Balaji ，2009; Mittai and Swa- mi ，2004)， and Costa Rica ( Lopez and Roberts ，2002)． This tendency to use data from emerging markets has been prevalent since the late 1990 s ．

Research conducted using data from emerging markets can be divided into two types. First is the analysis of foreign companies that entered an emerging market ( Murray et al., 2012; Magnusoon et al., 2009; Isobe et al., 2000; Pan et al., 1999; Luo and Peng ，1998; Mascarenhans ，1997)． For example, Isobe et al . (2000)， using data on 220 Japanese joint ventures that entered the Chinese market, found that joint ventures that entered early had significantly higher performance. Second is the analysis of entire companies, including local companies, within emerging markets ( Ghosh ，2011; Balaji ， 2009; Mittai and Swami ，2004; Lopez and Roberts ，2002)． Balaji (2009)，

using data on 394 companies in 32 industries in India, showed that early en-

trants had higher market share than followers. These studies indicate that,

First-mover Advantage Revisited: A Systematic

Review and Directions for Future Research 63

in emerging markets, entering earlier than rivals might enhance perfor- mance.

Although research on manufacturing industries has accumulated, little research has appeared on service industries. However, in recent years, research on the service industry has been steadily increasing. This includes the mobile telecommunications industry ( Jakopin and Klein ，2012; Fer- nandes and Usero ，2007)， advertising agencies ( Magnusson et al., 2009)，

pension funds ( Lopez and Roberts ，2002)， and money market mutual funds ( Makadok ，1998)． The results pertaining to the service industry sup- port FMA, but there are some exceptions. Fernandes and Usero (2007)，

analyzing 61 firms in the European mobile telecommunications industry, found that the effect of FMA diminishes in these conditions ; there is an ab- sence of number portability and market where follower companies entered early. Lopez and Roberts (2002) also show that followers eroded the market share of early entrants in the credit card market in Costa Rica.

Table 3 indicates the relationship between product category and the support rate of FMA. As can be seen in this table, the effects of FMA differ across product categories. For example, the support rate of FMA in the manufacturing industry (76.2％) is higher than that in the service industry (69.2％)． This means that imitating other companies is easier in the service sector than in manufacturing. In addition, as with product category, country

Table ３． FMA support rate ( industry-wise )

Support No support Total Support rate

Manufacturing 16 5 21 76.2％

Service 9 4 13 69.2％

Other 7 5 12 58.3％

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Table ４．FMA support rate (country-wise)

Support No support Total Support rate

Emerging

market 19 7 26 73.1％

Other 13 7 20 65.0％

type affects FMA. Table 4 shows that the support rate of emerging coun- tries is 73.1 percent, while that for nations other than emerging countries is 65.0 percent, which indicates that entering earlier than other companies is a better strategy in emerging countries.

4.2 First-mover advantages and disadvantages

In this section, we summarize the results obtained from empirical stu- dies on FMA. Although 12 out of 20 studies support FMA, the remaining eight studies showed that advantages for early entrants are weak or disap- pear as time passes. These mixed results invoke two contingent factors: in- ternal resources and the condition of markets.

First, internal firm resources compensate for the disadvantages of late

entry. For example, Magnusson, Westjohn, and Boggs (2009) found that

later entrants in emerging markets could overcome disadvantages if they

had experience of management in a foreign country or if they entered into an

alliance with a local-country corporation. Rodr რguez-Pinto, Guti áe rrez-Cill áa n,

and Rodr რguez-Escudero (2007) also noted that early entrants cannot sustain

high performance without sufficient R&D resources. Boulding and Christen

(2003) revealed that first-to-market leads to cost disadvantage and long-

term profit disadvantages relative to later entrants. Nevertheless, pioneers

benefit from 1) lack of consumer learning ， 2) strong market position, and 3)

patent protection. These three factors moderate the pioneer's cost disadvan-

First-mover Advantage Revisited: A Systematic

Review and Directions for Future Research 65

tage. These empirical studies illustrate the moderating effect of firm resources on entry timing.

The second contingent factor is market conditions. Magnusson, Gordon, and Aurand (2012)， using a sample of 314 advertising subsidiaries in Eastern Europe, the Middle East, and Africa, reveal that early entrants have higher performance than later entrants in these geographic regions and that the entry timing effect is moderated by environmental dynamics. Political in- stability and economic openness inhibit early entrants' ability to generate FMA. Kim and Lee (2011) also pointed out that market conditions weaken the possibility of FMA. They demonstrated that early entrants have a higher market share, except in regimes characterized by high technological oppor- tunity and a low level of R&D appropriability. Wang, Chen, and Xie (2010) analyzed how the strength of network effects and product compatibility af- fect the survival advantage of pioneers. They observed that, in markets with high network effects, the pioneer can enjoy a survival advantage when cross- generation compatibility and within-generation incompatibility exist. By con- trast, in markets with low network effects, the pioneer has more of a sur- vival advantage when cross-generation incompatibility and within-generation compatibility exist. These empirical results show that market conditions constitute an important moderating factor in FMA.

５． Discussion and suggestions for future research

In this paper, we assessed the results of past empirical research, which

was systematically abstracted from the SciVerse database. As shown in the

previous section ，12 out of 20 studies support FMA, while the rest partially

support FMA according to the prevailing conditions. In this chapter, we

66 KEIEI TO KEIZAI

summarize the findings on FMA from our systematic review, and suggest directions for future research.

First, we found that the effect of FMA differs depending on the perfor- mance measure, especially when market share is used as a dependent varia- ble. This result is similar to past systematic reviews ( Vanderwerf and Ma- hon ，1997)． Market share may be strongly associated with entry timing be- cause no rivals exist when the pioneer enters a market for the first time ; in- deed, a pioneer's market share is 100 percent. Then, the second mover and third mover start business in the market, but the pioneer's share is still high.

This advantage might be generated by consumer preferences, as consumers learn about brands and their preferences ( Carpenter and Nakamoto ，1989)．

Finally, although the benefits of being a first-mover dissipate over time, the pioneer's market share does not tend to decrease dramatically in the early stage. Thus, it can be said that the market share of the pioneer is associated with performance.

On the other hand, the conditions of the profit rate and survival proba- bility for the pioneer differ from those for market share. Pioneering leads to an even stronger long-term cost disadvantage ( Boulding and Chriseten ， 2003)． Pioneers should spend relative to high marketing expenses because radical new product does not gain legitimacy from consumers and society.

While pioneers have the disadvantage of the cost incurred to introduce a new product, followers are able to imitate their innovation at a low cost. This situation generates a contradiction between high market share and low profit rate and survival probability.

Second, we found that FMA does exist but depends on internal firm

resources and the external environment. This result indicates that we should

consider the entry timing effect not as a first condition but as a second or

First-mover Advantage Revisited: A Systematic

Review and Directions for Future Research 67

third condition ( Lieberman and Montgomery ，2013; Zachary et al., 2014)．

Vidal and Mitchell (2013) point out that whether the first mover becomes an early survivor depends on the degree to which the early entrant possesses the core and complementary resources needed for a new market relative to followers. Suarez and Lanzolla (2007) demonstrate that environmental dy- namics ( the pace of technology evolution as well as market evolution ) either impose restrictions or create opportunities for the exploitation of FMA. As these results indicate, FMA might be better understood as an indirect effect than a direct effect.

5.1 Theoretical direction

The following points need to be considered for future research. First, future research should consider the connection between the resource-based view ( RBV ) and FMA. Although Lieberman and Montgomery (1998) em- phasized the importance of this theoretical linkage, not much progress has been made in the last decade. In an exceptional case, Finney, Lueg, and Campbell (2008) developed a conceptual framework involving RBV and FMA. According to the authors, whether the pioneer gains competitive ad- vantages depends on the resource management process, efficient acquisition of resources, bundling / combining of resources, positioning of resources, and maintenance / protection of resources. They conclude that market-entry timing is not a panacea but, instead, part of the firm strategy. Efficient resource management helps pioneers sustain competitive advantage.

While resource acquisition and management are imperative for the com-

petitive advantage of pioneers / followers, excessive focus on resources veils

the importance of entry timing effects. If the focal point of the discussion

moves to the relative merit of firm resources, the discussion will be the same

68 KEIEI TO KEIZAI

as that from the RBV. To avoid duplication, future research should carefully test the effects of resources and of entry timing at the same time.

Second, we need to elaborate the relationship between external environ- ment or industrial institution and FMA. Unlike that on internal resources, research on the external environment has not been accumulated ( Suarez and Lanzolla ，2007)． However, studies have started to focus on the effect of en- vironments and institutions. For example, Mugnusson et al . (2012) observed that political instability or market openness affects the pioneering advan- tage. Wang, Chen, and Xie (2010) also pointed out that the strength of net- work externality in a market has a significant effect on the survival rate of the pioneer. In addition, the theoretical model of environmental dynamics for building FMA sheds light on the perspective for FMA research. As the ef- fect of entry timing differs from country to country, we need to determine what country- and industry-specific conditions contribute to pioneers' advan- tage.

Third, there is a need to analyze the factors affecting firm entry timing ( e . g., Mitchell ，1989; Robinson, Fornell, and Sullivan ，1992; Thomas ， 1996; Schoenecker and Cooper ，1998; Fuentelsaz, Gomez, and Polo ，2002;

King and Tucci ，2002)． Prior FMA studies focus on the effect of entry tim- ing on firm performance. However, if entering earlier than rivals contributes to firm performance, an important question needs to be answered : What fac- tors affect firm entry timing ?

For example, King and Tucci (2001) found that production and sales ex-

perience in previous market niches encourages firms to enter a new market

in the disk drive industry. Mitchell (1989) noted that an incumbent is likely

to enter a new technical subfield if it possesses industry-specialized assets

( e . g., a direct distribution system )． Likewise, Helfat and Lieberman (2002)

First-mover Advantage Revisited: A Systematic

Review and Directions for Future Research 69

showed that firms enter markets when they perceive that their pre-entry resources and capabilities match the required resource profiles in those mar- kets. They noted that, if the similarity between pre-entry resources and the required resource profile is high, the chance of survival is also high. As these studies imply, clarifying the factors that affect entry timing helps us under- stand how to build competitive advantage and the mechanism of FMA.

Fourth, further studies should examine the first-mover disadvantages and late-mover advantages. Lieberman and Montgomery (1988，1998) sug- gest that entering early has both advantages and disadvantages. However, most studies have focused on the first-mover advantage. Although our results from the systematic review support FMA, not all first movers win ( Shankar, Carpenter, and Krishnamurthi ，1998; Zhang and Markman ， 1998)． For example, Cho, Kim, and Rhee (1998) presented two late-comer strategies that enable a late entrant to become a successful competitor. The first strategy for overcoming the latecomer disadvantage is to focus invest- ment on the target product segments. The second strategy is to explore the latecomer advantage of odd timing. Through odd timing, latecomers can catch up with early movers by breaking existing rules. Leveraging these strategies, latecomers may have opportunities to deliver higher performance than early entrants.

5.2 Limitations

The limitations of this study are two-fold. First, we did not preclude the

problem of sampling biases. A systematic review is more reliable than a nar-

rative review because the former involves a systematic protocol for selecting

the papers used. However, sampling biases are not completely excluded. We

selected only empirical studies from refereed journals to ensure the quality

70 KEIEI TO KEIZAI

of the research. Meanwhile, some scholars suggest that including not only refereed journals but also non-refereed and unpublished journals would en- hance the validity of the review ( Tranfield et al., 2003)． Future studies might expand the sample of target journals to pursue broader generaliza- tions about FMA.

Second, our study might have had accuracy of analysis issues. We col- lected empirical studies and examined the entry order effect through a quan- titative approach. This approach raises the question of whether the number of tests that support FMA differs significantly from the number of those that do not. Therefore, future research should conduct a statistical analysis, such as a meta-analysis, to investigate this difference.

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