Page "First-mover advantage" Paragraph 17

Secondary or late movers to an industry or market, have the ability to study the first movers and their techniques and strategies.

“ Late movers may be able to ‘ free-ride ’ on a pioneering firms investments in a number of areas including R & D, buyer education, and infrastructure development ”.

The basic principle of this effect is that the competition is allowed to benefit and not incur the costs which the first mover has to sustain.

These “ imitation costs ” are much lower than the “ innovation costs ” the first mover had to spend, and also can cut into the profits which the pioneering firm would otherwise be enjoying.