Working Paper | HBS Working Paper Series | 2019

Pioneer (Dis-)advantages in Markets for Technology

by Moritz Fischer, Joachim Henkel and Ariel Dora Stern

Abstract

This study sheds new light on first- and early-mover advantages in the context of product innovation. Research on this classic topic often assumes that each firm participates in the entire innovation process. However, a division of labor between innovative new entrants and incumbents with complementary assets is common in many industries. In such settings, small new entrants have the additional option to be acquired in a “market for technology.” Using data from the U.S. medical device industry, we find that pioneers “pave the way” for a new product type to reduce the technological and market risks, where the former is of paramount importance. Although pioneers ultimately realize a higher likelihood of acquisition, they wait longer to be acquired. Therefore, to some extent, later movers can free ride on early-movers’ efforts.

Keywords: first-mover advantage; Innovation Strategy; Market Entry and Exit; Acquisition; Technology;

Language: English Format: Print 39 pages SSRN Read Now

Citation:

Fischer, Moritz, Joachim Henkel, and Ariel Dora Stern. "Pioneer (Dis-)advantages in Markets for Technology." Harvard Business School Working Paper, No. 19-043, October 2018. (Revised November 2019.)

About the Author

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Ariel D. Stern
Poronui Associate Professor of Business Administration
Technology and Operations Management

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