An Empirical Study of Launch Order Valuation Based Upon Stock Market Reaction

Abstract

The preponderance of evidence, reported in more than three decades of research, appears to support a substantial advantage for first-movers, primarily manifested in the form of increased market share. However, there is growing evidence that the market share advantage of pioneering may not provide a long-term financial advantage because of the high costs of developing and introducing new products, the high rate of new product failures, and the dramatically changing marketing environment ([@R6]; [@R15]; [@R19]; [@R36]). This study examines the financial impact of launch order strategy using an event study methodology that incorporates market reactions based upon stock price swings. Results indicate that first-movers do experience a net financial benefit; however much of these initial gains are transitory, and are dissipated with the entry of second and third-movers. Furthermore, first-mover advantages are declining over time.