First- or Second-Mover Advantage? The Case of IT-Enabled Platform Markets
Authors: Feng, Haiyang; Jiang, Zhengrui; Li, Minqiang; Feng, Nan
Journal: MIS Quarterly (2020)
<jats:p>Information technology-enabled platforms are playing an increasingly important role in the global economy. While some successful platforms entered their respective markets as pioneers, others were able to achieve market dominance despite starting as followers. This study investigates the conditions under which first-mover advantage (FMA) or second-mover advantage (SMA) occurs in a platform market, and derives their equilibrium order of market entries and optimal market entry timing. The first three determinants of FMA and SMA we identify are (1) quality improvement rate of the second mover, (2) length of demand window, and (3) length of market growth phase of demand window. When the two companies’ order of market entries is predetermined, the second mover having a higher initial platform quality than the first mover guarantees SMA, whereas the first mover having a higher initial platform quality than the second mover does not ensure FMA. In the latter case, the three determinants are needed to determine FMA and SMA. When the two companies’ order of market entries is endogenous, if any of the three determinants is sufficiently small, preemptive entry, in which both companie…