Early Mover Advantages

Abstract

In this paper we analyze empirically whether and if so to what extent later entrants in the European mobile telephony industry have a disadvantage vis-a-vis incumbents and early mover entrants. To analyze this question we consider a series of static models and a dynamic model of market share development. We find a clear early mover advantage, mainly caused by the influence of the penetration rate: It pays to enter when still few people have acquired a mobile telephone. Another important determining factor is the Herfindahl-Hirschman Index at the moment of entry: It is significantly easier to enter a highly concentrated industry. Finally, there are important differences between countries possibly indicating the relative strength of the national regulators. For example, it turns out that it is relatively difficult to enter the mobile telephony sector and gain market share in the Scandinavian countries.

Keywords: Telecommunications, Entry, First-mover Advantage

JEL Classification: L51, L96