Their empirics are subject to survivorship bias and their examples still depended on IP protection

Nonetheless—despite its numerous fallacies—the narrative of the first mover advantage has been echoed by popular, although exceptional, business success stories. For example, Sony gained first-mover status in 1979 with its personal stereo, the Walkman. Similarly, in 1995, eBay built the first online auction website, and the company today continues to be a popular shopping site worldwide. In the same year, Amazon created the first online bookstore and leveraged on its first-mover advantage to market a range of additional products. In the early 2000s, Apple released the iPod, which marked the end of Sony’s primacy in the portable music devices market, and the iPhone, disrupting the mobile phone landscape. At first glance, these remarkable stories seem to justify the idea that underpins the first mover advantage theory: in order to succeed, companies need to take risks and go to the market first.

On this basis, some have argued that achieving a first mover advantage—even in the absolute absence of patent protection—is sufficient to dominate the market and preserve monopoly over a technology.37 On this premise, policy interventions aimed at diluting the strength of patent rights have emerged.38 Scaling back both the scope and the duration of patent protection is an example of a frequently suggested policy, justified by means of the first mover advantage theory, especially for the information and communications technology (ICT) sector.39 Furthermore, some have even suggested the elimination of all means of IP protection.40 However, upon closer inspection, one can easily recognize how IP protection not only plays a vital role in the appropriation of the returns on R&D investments, but also in the survival of the successful first movers mentioned earlier. For instance, it is common knowledge that the success of Sony’s Walkman cannot be entirely attributed to its first mover status alone.41 In fact, before launching its iconic product, Sony developed a comprehensive strategy founded on: (i) a recombination of existing in-house IP, and (ii) an accurate mix of brand name and marketing skills, supported by substantial financial resources. Similarly, Amazon dominated its market by obtaining a patent for its ‘one-click’ system for processing customer orders. The ‘one-click’ patent gave Amazon a key advantage by putting pressure on competitors, such as Barnes & Nobles, who eventually left the market.42 Finally, the success of the iPhone was built upon strong IP protection of its iOS operating system.43

Therefore, for every successful first mover there are many failed ones that are often overlooked. This additional fallacy is the result of a survivorship bias, which occurs when observers exclusively focus on the individuals that ‘survived’ some sort of selection, while ignoring those who did not.44 However, a careful review of recent business history reveals many instances of unsuccessful first movers that often exited the market because of careless IP management. The case of Wang Laboratories provides an interesting example. The company—a pioneer in office automation, word processing and minicomputers during the 1970s and the 1980s—declined abruptly because of its decision to neglect patent prosecution to secure its innovations. This lack of IP protection paved the way to rapid imitation arising from competitors, such as IBM and Xerox, which quickly developed similar products.45 In the photography technology domain, Polaroid represents a former first mover whose falling provides further evidence against the theory of first mover advantage. In this respect, Polaroid suffered from dramatically insufficient IP protection that, along with other factors (such as abrupt technological evolution and a shift in market preferences), contributed to the company’s decline.46