First-Mover Advantage Through Distribution: A Decomposition Approach

Mitsukuni Nishida ()

Marketing Science, 2017, vol. 36, issue 4, 590-609

Abstract: Whereas the extant literature on entry-order effects establishes that first entrants often earn higher market shares (“market-share advantage”), the literature on distribution suggests that increased distribution has a positive effect on sales. Can distribution help us better understand entry-order effects on market shares? This paper examines how the first entrant in a geographical market achieves a market-share advantage through distribution. For this purpose, I propose a simple method of decomposing sales into physical distribution and sales performance. The data come from a manually collected panel on six major Japanese convenience-store chains from 47 geographical markets between 1991 and 2007. Using an instrumental variable approach to address the potential endogeneity of entry order, I find first entrants have a positive market-share advantage over later entrants. Specifically, the physical distribution, measured by the number of outlets in a market, drives most of the advantage. Meanwhile, the positive effect on sales performance for the first chain brand becomes nonexistent when I control for the outlet density. This paper further finds that the density of own outlets is nonmonotonically (inverted U) related to sales performance per outlet, suggesting dynamic outlet expansion faces a trade-off between the business-stealing effect in a chain (“cannibalization”) and the advertising effect through repetition.

Keywords: first-mover advantage; pioneering advantage; order of entry; market share; distribution; convenience store; chain; retailing; IV estimation (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://doi.org/10.1287/mksc.2017.1029 (application/pdf)

Related works:
Working Paper: First-Mover Advantage through Distribution: A Decomposition Approach (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:36:y:2017:i:4:p:590-609

Access Statistics for this article

More articles in Marketing Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().