2020
Working Paper
HBS Working Paper Series

Pioneer (Dis-)advantages in Markets for Technology

By: Moritz Fischer, Joachim Henkel and Ariel Dora Stern

Format:Print
| Language:English
| Pages:42

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 entirety of the innovation and commercialization process. However, a division of labor between innovative new entrants and incum-bents 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. Pioneers enjoy an early-mover advantage in the form of a higher likelihood of acquisition, with the disadvantage that they wait longer to be acquired. Therefore, to some extent, later movers can free ride on early-movers’ efforts.

Keywords

First-mover Advantage; Product; Innovation Strategy; Market Entry and Exit; Acquisition; Technology

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 March 2020.)