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First Mover Advantage

Term used to describe the advantages that can accrue to the first player to enter a competitive space, e.g., establishing early customer relationships, etc. However, in contrast some commentators point to the existence in some circumstances of “last or late mover advantage,” which typically includes lower cost for equipment, greater ease in locating and hiring skilled employees, and learning from first mover mistakes.

Late mover advantage as compared to first-mover advantage has been significant in Internet business, as early in the development of the Internet, hardware and software was expensive, relatively few potential customers had good Internet connections or were familiar with the Internet, while individuals with the ability to create Web-pages were hard to find and consequently highly paid; all of these costs were significantly lower after a short period of time, which meant that the capital costs of later movers (and hence debts) were much lower. Patents usually form a key element of a first mover’s strategy for defeating late mover advantage.

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