In the study of corporate strategy, analysts often focus on the benefits of being a pioneer in a new market, but they frequently overlook what economists term the 'second-mover advantage.' This phenomenon occurs when a pioneering company invests heavily in researching and developing a novel, untested infrastructure, absorbing all the financial risks and the costs of early failures. A second company can then enter the same market after the pioneer has successfully established a viable model. This second firm avoids the initial research and development expenses, bypasses the costly trial-and-error phase, and simply replicates the pioneer's proven infrastructure at a fraction of the cost, thereby gaining a competitive edge.
Which one of the following scenarios is most logically analogous to the 'second-mover advantage' as described in the passage?
- A research hospital spends millions of dollars and several years developing a highly effective surgical technique through trial and error, after which a competing clinic simply adopts the perfected technique by reading the published results.Answer
- BA pioneering company invests heavily in a novel infrastructure but fails because the market is not yet ready for the product, forcing the company into bankruptcy before competitors can arrive.
- CAn established firm leverages its vast financial resources to aggressively market an existing product, successfully driving out the smaller competitors who originally invented the item.
- DA large technology corporation observes a small startup gaining popularity and decides to aggressively acquire the startup in order to gain exclusive ownership of its patents.
- EA retail chain delays opening its new location until a competitor proves the neighborhood is popular, but then discovers that the competitor has already captured all the available customer demand.