Why It Pays to Be No. 2 in Your Industry

The Study: "Legitimacy Vacuum, Structural Imprinting, and the First-Mover Disadvantage," by Stanislav D. Dobrev, David Eccles School of Business, University of Utah; and Aleksios Gotsopoulos, Boston University; Academy of Management Journal

The Finding: Contrary to the accepted idea of "first-mover advantage," the best time for a start-up to enter a new industry is after other companies have already gotten there. Because basic practices, such as lining up suppliers, have not yet been established, first movers perform poorly at these tasks.

The Methodology: The authors researched the U.S. auto industry going back to the 1880s. The most successful companies entered the industry only after some 20 others had launched. The researchers compared their findings with the experience of French and British auto firms to corroborate the relationship between first movers and failure.

Intriguing Insight: Most people believe in the first-mover advantage because they rarely hear about the many first movers that fail.

The Takeaway: If you are second—or third or fourth—to market, you stand a better chance of success by learning from the first guy's mistakes.

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