The role of environmental dynamics in building a first mover advantage

We advance first mover advantage (FMA) theory by examining how the pace of market evolution and technology evolution potentially enables or disables FMA. Integrating several streams of literature, we elaborate on the interplay among these two envi-ronmental (macro) conditions and the “isolating mechanisms ” that underpin FMA. We model these dynamics to help researchers negotiate the current debate, arising from conflicting empirical evidence, on the conditions necessary for FMA to exist. In the management literature the conceptual appeal of first mover advantages (FMA) is evi-dent. Using “first mover advantage ” as key-words, our search for peer-refereed journal arti-cles in the Business Source Premier database yielded a total of 839 articles. The concept has also enjoyed ample diffusion in the practitioner-oriented literature and has fueled aggressive claims and an ongoing debate about whether the advantage actually exists. Consider, for in-stance, Arthur’s claim that “two maxims are widely accepted in knowledge based markets: it pays to hit the market first and it pays to have superb technology ” (1998: 100). This assertion contrasts sharply with Sandberg’s claim that “in most cases... being the first mover is no guar-antee of success ” (2001: 3). The academic literature has been unable to provide conclusive empirical evidence to sup-port or refute the existence of FMA. Some empir-ical studies point to a negative relationship be-tween order of entry and such measures of a firm’s performance as market share (Bond &amp