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

Author

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  • Sofka, Wolfgang
  • Schmidt, Tobias
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.

Suggested Citation

  • Sofka, Wolfgang & Schmidt, Tobias, 2004. "I Like The Way You Move: An Empirical Investigation into the Mechanisms Behind First Mover and Follower Strategies," ZEW Discussion Papers 04-87, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:2891
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    References listed on IDEAS

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    Cited by:

    1. Sofka, Wolfgang & Zimmermann, Jörg, 2005. "There's no Place Like Home: A Strategic Framework to Overcome Liability of Foreignness in the German Car Market," ZEW Discussion Papers 05-84, ZEW - Leibniz Centre for European Economic Research.
    2. Sofka, Wolfgang, 2005. "Global Idea Sourcing: An Empirical Investigation into the Mechanisms Behind the Usage of Foreign Business Sources for Innovation," ZEW Discussion Papers 05-53, ZEW - Leibniz Centre for European Economic Research.
    3. HanGyeol Seo & Yanghon Chung & Chungwon Woo & Dongphil Chun & Soojeen Sarah Jang, 2016. "SME’s Appropriability Regime for Sustainable Development-the Role of Absorptive Capacity and Inventive Capacity," Sustainability, MDPI, vol. 8(7), pages 1-16, July.
    4. Faria, Pedro & Schmidt, Tobias, 2007. "International Cooperation on Innovation: Empirical Evidence for German and Portuguese Firms," ZEW Discussion Papers 07-060, ZEW - Leibniz Centre for European Economic Research.
    5. W. Sofka, 2008. "Globalizing Domestic Absorptive Capacities," Management International Review, Springer, vol. 48(6), pages 769-792, December.
    6. Aerts, Kris & Schmidt, Tobias, 2008. "Two for the price of one?: Additionality effects of R&D subsidies: A comparison between Flanders and Germany," Research Policy, Elsevier, vol. 37(5), pages 806-822, June.
    7. Tobias Schmidt, 2010. "Absorptive capacity-one size fits all? A firm-level analysis of absorptive capacity for different kinds of knowledge," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(1), pages 1-18.
    8. Schmidt, Tobias, 2006. "An Empirical Analysis of the Effects of Patents and Secrecy on Knowledge Spillovers," ZEW Discussion Papers 06-048, ZEW - Leibniz Centre for European Economic Research.
    9. Marco A. Marini & Maria L. Petit & Roberta Sestini, 2014. "Strategic timing in R&D agreements," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 23(3), pages 274-303, April.
    10. Birgit Aschhoff & Tobias Schmidt, 2008. "Empirical Evidence on the Success of R&D Cooperation—Happy Together?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 33(1), pages 41-62, August.
    11. Tobias Schmidt & Wolfgang Sofka, 2005. "Lost in Translation - Empirical Evidence for Liability of Foreignness as Barriers to Knowledge Spillovers," Industrial Organization 0512012, University Library of Munich, Germany.

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    More about this item

    Keywords

    innovation strategy; first mover; bivariate probit;
    All these keywords.

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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