Definition
First Mover Advantage refers to the competitive advantages available to a firm that enters a market before its rivals and thereby establishes an early foothold. By virtue of its early market presence, several advantages – including brand recognition, a large and loyal user base, technological leadership, access to data, economies of scale, and/or control over distribution channels – may be acquired by the firm. These advantages may allow the early entrant to establish a durable market position and create barriers to entry for prospective competitors.
For instance:
Google benefited from advantages due to its early entry and scale in online search;
Facebook benefitted from an early competitive advantage in the social networking segment.
However, it is pertinent to note that the first mover advantage is not automatic or permanent. Historically, many early entrants have been displaced and taken over by more efficient and innovative rivals, for instance, MySpace by Facebook and Yahoo! by Google.
Commentary
1. Origin of the term
The concept of first mover advantage is not new. In fact, it gained prominence as an economic concept in the strategic management and industrial organization literature during the 1980s, primarily through the work of Marvin B Lieberman and David B Montgomery in their influential article titled ‘First-Mover Advantages’.1 In the said piece, the authors identified certain specific mechanisms, including technological leadership, pre-emption of scarce assets, and buyer switching costs, that may allow early entrants to obtain enduring competitive advantages. Their work illustrated that first mover advantages should be understood as the legitimate benefits that flow from innovation, investment, risk-taking, and successful market entry.
2. Role of competition law
The mere presence of a first-mover advantage does not, in itself, establish a competition law concern. Intervention by competition authorities is warranted only where a firm’s conduct is exclusionary in nature. Such conduct must be aimed at unlawfully preserving or extending the advantages acquired through early market entry.
3. Limitations
Economic studies suggest that, because first movers often bear the substantial costs of creating and developing new markets, they do not always succeed. Later entrants may duplicate successful innovations, adopt superior technologies and avoid early mistakes, without bearing the same cost and time associated with R&D and market experimentation. These later entrants, often referred to as ‘fast-followers’, may frequently outperform the first movers. Accordingly, the regulator should exercise caution in assuming that being an early entrant inevitably leads to durable market power.
4. Illustrative examples
Successful first mover – Microsoft (personal computer operating systems): The initial dominance of Microsoft in PC operating systems, particularly through Windows, helped it to secure widespread adoption, build a large user base and create a strong ecosystem.
First-mover failure – Netscape vs. Microsoft Internet Explorer (web browsers): In the mid-1990s, Netscape Navigator was among the first browsers which made public access to the World Wide Web popular. However, in contrast to Netscape Navigator, Microsoft was able to bundle Internet Explorer directly with Windows, which enabled it to capitalize on its distribution advantages and displace Netscape’s early lead.
Marvin B Lieberman and David B Montgomery, ‘First-Mover Advantages’ (1988) 9 Strategic Management Journal 41, http://www.jstor.org/stable/2486211 (accessed June 18, 2026).↩︎
