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First-Mover Advantage through Distribution: A Decomposition Approach

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  • Nishida, Mitsukuni
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 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 deal with the potential endogeneity of entry order, I find the market-share advantage for the first chain brand is positive. Specifically, the physical distribution, measured by the number of outlets in a market, drives most of the advantage. This paper further finds the density of own outlets is nonmonotonically related (inverted U) to sales performance per outlet, suggesting dynamic outlet expansion faces a trade-off between business-stealing effects within a chain ("cannibalization") and advertising effects through repetition.

Suggested Citation

  • Nishida, Mitsukuni, 2016. "First-Mover Advantage through Distribution: A Decomposition Approach," HIT-REFINED Working Paper Series 42, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:remfce:42
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    Cited by:

    1. Mitsukuni Nishida, 2018. "A Structural Analysis of Entry Order, Performance, and Geography: The Case of the Convenience-Store Industry in Japan," KIER Working Papers 993, Kyoto University, Institute of Economic Research.
    2. Dekimpe, Marnik & Gijsbrechts, Els & Gielens, K.J.P., 2023. "Proximity-store introductions: A new route to big-box retailer success?," Other publications TiSEM 14dc6958-ab6b-4d70-995d-f, Tilburg University, School of Economics and Management.
    3. Haili Zhang & Michael Song, 2020. "Do First-Movers in Marketing Sustainable Products Enjoy Sustainable Advantages? A Seven-Country Comparative Study," Sustainability, MDPI, vol. 12(2), pages 1-14, January.
    4. Pasirayi, Simbarashe & Fennell, Patrick B. & Sen, Argha, 2023. "The effect of third-party delivery partnerships on firm value," Journal of Business Research, Elsevier, vol. 167(C).
    5. Dong‐Sing He & Imen Tebourbi, 2021. "Measuring the continuation effects of market order entry: A dynamic model," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(3), pages 762-777, April.
    6. Robert W. Palmatier & Andrew T. Crecelius, 2019. "The “first principles” of marketing strategy," AMS Review, Springer;Academy of Marketing Science, vol. 9(1), pages 5-26, June.
    7. Antonis A. Michis, 2023. "Retail distribution evaluation in brand-level sales response models," Journal of Marketing Analytics, Palgrave Macmillan, vol. 11(3), pages 366-378, September.
    8. Dekimpe, Marnik G. & Gijsbrechts, Els & Gielens, Katrijn, 2023. "Proximity-store introductions: A new route to big-box retailer success?," Journal of Retailing, Elsevier, vol. 99(4), pages 621-633.

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    More about this item

    Keywords

    fi rst-mover advantage; pioneering advantage; order of entry; market share; distribution; convenience store; chain; retailing; IV estimation;
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