Microeconomic Life Lessons: The Second-Mover Advantage
My nephew (age 12) had an existential crisis the other day. He wants to be a musician or a writer but is stressed out because “all of the good ideas are already taken”. I decided to spare him four years of rigorous economics coursework and told him about the most important economics lesson I’ve learned – the second-mover advantage:
Second-mover advantage occurs when a firm who follows the lead of the first-mover is actually able to capture greater market share, despite having entered late.
First-mover firms often face high research and development costs and the marketing costs necessary to educate the public about a new type of product. A second-mover firm can learn from the experiences of the first mover firm and may not face such high research and development costs if they are able create their own similar product using existing technology. A second-mover firm also does not face the marketing task of having to educate the public about the new project because the first mover has already done so. As a result, the second-mover can use its resources to focus on making a superior product or out-marketing the first mover…the notion that winners are always the first to enter the market is a misconception. (Wikipedia entry)
Examples include Obama (vs. Hillary), Nintendo (vs. Atari), Oprah (vs. Donahue), and AMD (vs. Intel). Second-movers are able to capitalize on the work done by others and create innovative products at a lower cost. The “early bird may catch the worm” but later birds can dominate marketing and distribution.
Think different? No: Observe first. Think second.
good article, i certainly adore this site, continue on it.
31 March 2011 at 6:07 pm
Yes, its correct that second mover does have certain advantages. First mover advantages are in areas where there is significant technology barrier for newer companies to enter (example pharmaceuticals, semiconductors etc). More details are in my blog at – http://shantanub.com/second-mover-advantage
Shantanu Bhalerao
24 April 2011 at 10:59 pm
[...] Austin has the technical skills and investment capital to launch its own social network and use a second mover advantage to make ours even more engaging and successful than theirs. If Austin’s tech community made [...]
Where is Austin’s Green Social Network? | BusinessEarth
13 July 2011 at 11:49 pm
[...] 9.Microeconomic Life Lessons: The Second-Mover Advantage « An … Jun 11, 2008 … Second-mover advantage occurs when a firm who follows the lead of the first- mover is actually able … First-mover firms often face high research and development costs and the marketing costs … Examples include Obama (vs. … http://educatorblog.wordpress.com/2008/06/11/second-movers/ [...]
movers web » examples of second mover companies
2 January 2012 at 11:19 pm
[...] 9.Microeconomic Life Lessons: The Second-Mover Advantage « An … Jun 11, 2008 … Second-mover advantage occurs when a firm who follows the lead of the first- mover is … You are commenting using your Facebook account. … http://educatorblog.wordpress.com/2008/06/11/second-movers/ [...]
movers web » facebook second mover advantage
6 January 2012 at 2:50 pm
[...] 1.Microeconomic Life Lessons: The Second-Mover Advantage « An … Jun 11, 2008 … A second-mover firm can learn from the experiences of the first mover firm and may not face such … Examples include Obama (vs. … The “early bird may catch the worm” but later birds can dominate marketing and distribution. … http://educatorblog.wordpress.com/2008/06/11/second-movers/ [...]
movers web » first mover, second mover, late mover examples
9 January 2012 at 10:29 am