First mover advantage is nullified by the high costs of being a first mover

Another problem with the first mover advantage theory is that the high costs associated with being the first mover are largely ignored.28 More specifically, it is often overlooked that being the first to the market implies significant costs, for example in R&D and market intelligence. Other costs that are likely to arise when attempting to defend the first mover status from emerging competitors include: marketing campaigns, infrastructure building and maintenance and securing suppliers. In addition, later entrants can prepare for market entry by imitating the dominant technology, which can, in specific scenarios, provide them with a significant advantage over the first mover."9

The overemphasis on the timing of market entry is another misconception that can be defined as a form of reverse causation. In this context, reverse causation occurs when the company mistakenly assumes that being the first mover is the cause of its success, when in reality it is the result of other factors. In other words, the first mover advantage theory neglects several other factors that are likely to have contributed to obtaining first mover status.30

Finally, by accepting the overly simplified first mover advantage theory, market players seem to disregard the joint effect of technology and market change. Many products today embody different technologies, each evolving at various speeds and following different trajectories: some technologies develop in a series of incremental improvements (such as computer processors), while others advance disruptively (such as consumer electronics). In fast-changing markets with disruptive technology evolution, companies face great challenges as products incorporating rapidly changing technologies often experience the so-called 'vintage effect', by which obsolescence occurs in a very short time.31 Nonetheless, first movers may emerge but they are in a particularly risky and fragile position, especially if mechanisms to recoup heavy R&D investments—such as patents—are absent.32 In slow-changing markets, instead, first mover advantages are very unlikely to emerge, as early entrants will likely face sales and operational losses while the furious pace of technological evolution accelerates product obsolescence, bringing competitors in new markets.33 Therefore, in both scenarios, the presence of weak IP protection entails that only companies with deep pockets can master the technology and survive in an uncertain market, withstanding considerable delay before obtaining durable first-mover advantages.34 The result would not only see R&D and innovation investments drop to a suboptimal level, but also that some especially risky investments that can lead to creative destruction are never undertaken,35 ultimately leading societies to get locked into existing technologies.36