Question

What do new trade theorists point to as the reason for gaining a first-mover advantage? Multiple Choice supply conditions government policy factor endowments innovation and luck tariff and nontariff barriers

Answer 1

The answer is Innovation and luck

Step-by-step explanation:

In Business, we identify first movers and the fast followers. The first movers are those who identify a new market segment or a new market opportunity in the prevailing market and moves in first.

The move is risky. There is the risk of product failure and the risk of customers rejecting the new product / service yet the higher risks bear high returns.

If the customers accept the product or if the first movers can quickly respond to the market movements, the momentum can be sustained and the followers will not be able to challenge the first mover.

This is mainly because te ability of the first movers to innovate after the initial entry into the new segment. Then the followers will have to copy yet the customer loyalty and the brand name is already established by then.

Answer 2

INNOVATION

Step-by-step explanation:

First Mover Advantage is the gained competitive advantage due to being first entrant in the market & hence occupying significantly powerful place in that market segment.

First Mover advantages can be : Economies of Scale, because of higher demand (strong loyal customer base) & streamlined supply processes (old supply chains & supplier's connections) etc.

Old Trade Theorists suggested Factor Endowments as a reason for acquiring First Mover Advantage. New theorists highlight that 'Innovation' plays the main role in today's Knowledge Economies & endogenous growth approach (focusing on human capital, innovation & knowledge) era. Example : Amazon gained first mover advantage in E Commerce as it was first pioneer of innovative idea of selling goods at online platform.