I Like the Way You Move: An Empirical Investigation into the Mechanisms Behind First Mover and Follower Strategies

37 Pages Posted: 8 Apr 2005 Last revised: 20 Dec 2013

See all articles by Wolfgang Sofka

Wolfgang Sofka

Tilburg University; CentER; CIR

Tobias Schmidt

Deutsche Bundesbank - Research Center

Date Written: 2004

Abstract

There appears to be an ambivalent dimension in innovation strategies: timing. When is an innovation ready for the market or when is the market ready for the innovation? This paper empirically investigates the determinants of a firm's decision to become a first mover or a follower in innovation strategies. Much of theoretical and empirical work has focused on whether first mover strategies pay off or not. Here we take a different approach by analysing the determinants that lead companies to opt for either a first mover or a follower strategy. One of this paper's major goals is to distinguish between firm and industry specific effects on this particular strategic choice. We estimate our model using the most recent data from the German innovation survey of 2003. This dataset allows us to identify deliberate followers rather than outstripped first movers. One of our main findings is that firms choosing a first mover strategy operate in industries with intensive knowledge exchange and further leverage this advantage through excellent internal absorptive capacities. Followers, though, compete by way of their operational excellence for streamlining processes and cutting costs. Hence, we argue that neither of these two innovation strategies is per se superior to the other.

Keywords: Innovation strategy, first mover, bivariate probit

JEL Classification: L10, O32

Suggested Citation

Sofka, Wolfgang and Schmidt, Tobias, I Like the Way You Move: An Empirical Investigation into the Mechanisms Behind First Mover and Follower Strategies (2004). ZEW - Centre for European Economic Research Discussion Paper No. 04-087. Available at SSRN: https://ssrn.com/abstract=686709 or http://dx.doi.org/10.2139/ssrn.686709

Wolfgang Sofka (Contact Author)

Tilburg University ( email )

Netherlands

CentER ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

CIR ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Tobias Schmidt

Deutsche Bundesbank - Research Center ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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