Geng Cui and Hon-Kwong Lui
Executive Summary
Whereas some studies have found that first movers in foreign markets achieve superior performance than their later counterparts, others have revealed that the effect of first-mover advantages may be conditional on other factors, such as entry mode and resource commitment. Some researchers have explored the possibility that followers may overcome their late-moving disadvantages and eventually prevail. Drawing on the resource-based view, Cui and Lui examine the contingency effects of industry- and firm-level variables on the first-mover advantages and effective follower strategies for foreign investors in China.
The analysis of 4500 foreign investors in China suggests that industry growth and competition, firm size, entry mode, resource commitment, and marketing intensity have significant moderating effects on first-mover advantages. After correcting for the multicollinearity bias, Cui and Lui show that pioneers still enjoy a small advantage in market share but not in profitability, indicating a trade-off between the two. Thus, early entry alone may not be sufficient to generate sustainable advantages. Early entry makes more sense for large firms in high-growth industries and firms that partner with local firms. In addition, pioneers tend to fare better in more open and competitive industries than in highly concentrated industries. Thus, the first-mover advantage must be integrated with other complementary resources to generate competitive advantages. Furthermore, followers may augment performance by increasing resource commitment and marketing intensity. This enables them to make up the lost time and forgone advantages and potentially catch up with the early movers.
Given the results, Cui and Lui suggest that the claims about the benefits of pioneering in foreign markets need to be interpreted with caution. Such a decision must consider environmental and situational factors, such as industry growth, competitive scenario, and firm resources. Although emerging markets invariably offer attractive opportunities and sometimes handsome rewards for early movers, firms sometimes overlook the risks, challenges, and constraints of operating in volatile market conditions. Investors should consider the entry-order decision as a concerted effort to garner valuable resources on the basis of entry order and to deploy other firm resources and strategies that can help minimize risks, leverage their entry-order advantages, and sustain superior performance over time. It is critical that firms convert the opportunities that stem from entry order into competitive advantages and further develop their resources and capabilities to enhance their performance.
Biography
Geng Cui received his doctoral degree from the University of Connecticut. His research interests include China’s consumer market, foreign direct investment strategies and performance, international marketing, machine learning, and data mining. His research has appeared in Journal of International Marketing, Journal of World Business, Journal of Consumer Affairs, and Journal of Macromarketing. He has been a consultant to private and public organizations on issues related to China’s business, import/export trade, and marketing strategies. Currently, he focuses on studying China’s consumer market and applying machine-learning methods to marketing research.
Hon-Kwong Lui received his doctoral degree from the University of Hong Kong and is Associate Professor of Marketing and International Business at Lingnan University. He worked for a few years as a marketing executive in the retail industry and as a statistician in the civil service. His work has been published in journals such as Economic Inquiry, Labour Economics, Contemporary Economic Policy, Higher Education Review, Applied Economics Letters, and Asian Economic Journal, among others. His consulting experience is in the area of market research and analysis.
Journal of International Marketing, Vol. 13, No. 4, December 2005
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