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First-mover advantage in an Internet-enabled market environment: conceptual framework and propositions

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Abstract

The competitive market environment has evolved from a physical market environment (PME) to an Internet-enabled market environment (IME) encompassing the physical and electronic marketplaces. At the same time, an increasing number of information products are available in both analog and digital forms. For information products in digital form, the IME also serves as a distribution channel. Such developments raise questions concerning the extent to which extant perspectives on first-mover advantage developed in the context of the PME hold in the IME, generally, and for information products specifically. We address this issue by developing a conceptual framework that focuses on selected sources of first-mover advantage delineated in the extant literature and advance propositions concerning sources that will have a greater or lower effect in the IME relative to the PME. A central message for first-movers in the IME that emerges from our conceptual analysis is to focus on achieving superior positions in resources that would enable them to get close to the customers fast, create switching costs, and retain them though ongoing investments in multi-faceted innovations. A second message that emerges for first-movers in the IME is they must take note of and make strategic adjustments for the potentially diminished significance of some traditional sources of first-mover advantage. These sources include spatial preemption, preemptive investment in capacity, and consumers’ choice behavior under conditions of uncertainty about product quality. We discuss the implications for further conceptual and empirical work in this area of increasing significance.

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Notes

  1. Consistent with the literature, we adopt a broad definition of the term, first mover—as the first entrant in a category to enter in a meaningful scale. Furthermore, much of the first-mover advantage is derived in cases where there is a reasonable gap in entry timing between the first mover and later entrants, so we focus on those cases. We explain these issues in greater detail in the subsequent section.

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Acknowledgement

We thank Barry Bayus (University of North Carolina, Chapel Hill), Arvind Rangaswamy (Penn State University), Allan Shocker (San Francisco State University), Raji Srinivasan (University of Texas, Austin), Michel Clement and Marc Fischer (both from University of Kiel) for their valuable comments and suggestions on an earlier draft of this paper.

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Correspondence to Rajan Varadarajan.

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Varadarajan, R., Yadav, M.S. & Shankar, V. First-mover advantage in an Internet-enabled market environment: conceptual framework and propositions. J. of the Acad. Mark. Sci. 36, 293–308 (2008). https://doi.org/10.1007/s11747-007-0080-y

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