First Mover Advantage and the Speed of Competitive Entry, 1887-1986
University of Maryland - Robert H. Smith School of Business
SUNY at Buffalo, College of Arts & Sciences, Department of Economics; National Bureau of Economic Research (NBER)
The paper examines historical changes in the duration of the interval between the commercial introduction of a new product and the time when entry by later competitors begins.
The paper begins by examining a priori reasons why the duration of this interval in the U.S. economy may either expand or contract. This is done in the context of the literature on barriers to entry, and trends of the underlying barriers over the last century.
Data for 46 major product innovations show a systematic tendency for the interval identified above to contract over the last century. The average time-span was almost 33 years at the turn of the century, and has declined to 3.4 years for innovations in 1967-86. The declining trend in the monopoly interval is consistent across products that differ greatly in a variety of attributes.
Empirical evidence suggests this change resulted largely from a lowering of absolute cost advantages of first movers through easier transfer of knowledge and skills across firms and was facilitated also by the growth of markets.
Number of Pages in PDF File: 21
JEL Classification: O30, L20
Date posted: November 10, 1999