Evolving user needs and late-mover advantage

Abstract

We propose a generalized NK-model of late-mover advantage where late-mover firms leapfrog first-mover firms as user needs evolve over time. First movers face severe trade-offs between the provision of functionalities in which their products already excel and the additional functionalities requested by users later on. Late movers, by contrast, start searching when more functionalities are already known and typically come up with superior product designs. We also show that late-mover advantage is more probable for more complex technologies. Managerial implications follow.