The truth about the first-mover advantage
In 1988, Marvin B. Lieberman and David B. Montgomery, both eminent professors at Stanford Business School, theorized the notion of first-mover advantage (FMA) in a ground-breaking article.
The idea gets hold of the collective mind of innovators and business strategists as a core law of nature: pioneering firms would generate a head start over rivals, thus generating not only positive economic profits to start with but also a sustainable competitive advantage. In 1996 the authors received the Strategic Management Society price for this paper.
Everyone loved the idea.
Exactly ten years later, in 1998, the same authors published a counter piece called: First-Mover (Dis)Advantages: Retrospective and Link with the Resource-Based View. They try to diplomatically explain that maybe too many people tried to read too much in their first paper and – in one of the greatest understatements of management research – explain the difference between empirical and fact-based conclusions.
And what is their final conclusion ten years later? It's complicated (my words).
No one took notice or really cared.
To this day, the notion of first-movers having an inherent advantage over late entrants is a basic truth taught over and over in any business strategy class around the globe. The idea just clicks so well with what we intuitively expect that we just shut down our critical thinking. Hilariously enough, a common saying in the U.S. innovation playfield has also been for decades, "pioneers have arrows in the back." And yet, very few bother to resolve these conflicting views.
A vastly more interesting read, in my experience? Fast Second from C. C. Markides, who does a good job at summarizing why and how "sniper" companies prefer to ambush whoever is naive enough to try to be a first-entrant, learn from their V1 offer, and then iterate before them with a V2. It's not a perfect book by any means, but still, a quite solid introduction to business and innovation effectiveness.
