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 groundbreaking 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 prize 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 into 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 that first-movers have an inherent advantage over late entrants remains a fundamental truth taught in business strategy classes worldwide. 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 around 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 pretty solid introduction to business and innovation effectiveness.
