First-mover advantage in an Internet-enabled market environment: conceptual framework and propositions

The competitive market environment has evolved from a physical market environment (PME) to an Internet-enabled market environment (IME) encompassing the physical and electronic marketplaces. At the same time, an increasing number of information products are available in both analog and digital forms. For information products in digital form, the IME also serves as a distribution channel. Such developments raise questions concerning the extent to which extant perspectives on first-mover advantage developed in the context of the PME hold in the IME, generally, and for information products specifically. We address this issue by developing a conceptual framework that focuses on selected sources of first-mover advantage delineated in the extant literature and advance propositions concerning sources that will have a greater or lower effect in the IME relative to the PME. A central message for first-movers in the IME that emerges from our conceptual analysis is to focus on achieving superior positions in resources that would enable them to get close to the customers fast, create switching costs, and retain them though ongoing investments in multi-faceted innovations. A second message that emerges for first-movers in the IME is they must take note of and make strategic adjustments for the potentially diminished significance of some traditional sources of first-mover advantage. These sources include spatial preemption, preemptive investment in capacity, and consumers’ choice behavior under conditions of uncertainty about product quality. We discuss the implications for further conceptual and empirical work in this area of increasing significance.

Venkatesh ShankarEmail: