Pioneer (Dis-)advantages in Markets for Technology
39 Pages Posted: 1 May 2019 Last revised: 10 Nov 2019
Date Written: November 7, 2019
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 Advantages, Markets for Technology, M&A, Technology Acquisition, Medical Devices
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