Do switching costs mediate the relationship between entry timing and performance?

Abstract

The purpose of this paper is to test the effectiveness of switching costs as an isolating mechanism in the context of the first-mover advantage theory. Whereas both the literature on switching costs and on pioneering propose this as a mechanism through which firms could obtain sustainable competitive advantage, other authors offer a rationale for thinking that this is not the case. We test our hypotheses in the context of the European mobile telecommunications industry. This is a sector that has been characterized by high rates of growth in the number of subscribers, which could reduce the effectiveness of switching costs from being effective as an isolating mechanism. Our results show that switching costs are an important tool through which first-mover advantages materialize. Copyright © 2011 John Wiley & Sons, Ltd.