PHYSICS 102 Lecture Notes - Lecture 3: Switching Barriers, Risk Aversion, Product Differentiation
Document Summary
First-movers are commonly believed to accrue long-term competitive advantages, thought to derive directly from the firm"s competitive head start and to result in dominant and enduring market positions. Order of market entry and market share are believed to be causally related. How a firm can achieve first-mover status: produce a new product, use a new process, enter a new market. Main point of this article: a head start alone is not sufficient to achieve cost and differentiation advantages over rivals that result in dominant and enduring market shares and abnormal financial returns. Theoretical-analytical explanations: economic-analytical perspective, barrier entry: a cost of producing which must be borne by a firm which seeks to enter an industry but is not borne by firms already in the industry. Implies that additional resources must be expended by a non- pioneering firm (beyond those required under conditions of simultaneous entry) to compete effectively in the marketplace relative to the first mover.
