Remaining As A Leader or Not? Technology Spillover Answers

Abstract

Much has been discussed about the advantages and disadvantages of being a first mover. However, discussion regarding the incentives encouraging a firm to remain as leader is absent in most studies. This paper aims to fill this gap and provide theoretical and empirical evidences vis-à-vis the incentives of remaining as a leader, by comparing profits between leader and follower when taking technology spillover and technological efficiency into consideration. The findings show that in regard to effective technological efficiency: (i) under the condition of a weak (strong) technology spillover, retaining the position of leader firm is (not) a dominant strategy because of higher (lower) profits than a follower; (ii) the half-shared technology spillover leads to an equal profit between firms, and implies a critical time of action for the leader firm to break the evenly-matched status by reconsidering first mover advantages; (iii) an empirical study on a data set of 352 high-tech and non-high-tech SMEs in manufacturing industry from 1999 until 2006 lends strong support to these results and may also provide useful clues for technology managers or practitioners to make better policies to benefit their market competitiveness.