The Role of Litigation in First-Mover Performance in M-Business

In recent years, technological advances and regulatory change have profoundly modified many Internetrelated supply and user services. In some cases, although entry barriers for new competitors have been lowered, established companies have been able to reap certain sources of first-mover advantages (FMAs) as a result of their early entry into the market. Here, non-market strategies can be used by rivals and other industry participants to neutralize FMAs. This paper has two main objectives: on the one hand, to reflect on FMAs in an Internet-enabled market environment, specifically, mobile service providers; on the other hand, to study the impact of litigation on first-mover performance in the Spanish mobile services industry between November 2000 and July 2006. The results obtained show that litigation processes initiated against first mover Movistar, do not, on average, have a negative impact on market performance. Similarly, we observed that when legal proceedings do have an impact on a company’s stock market valuation, the negative impact, on average, outweighs the positive. Last, we also observed that the impact of some legal disputes on the first mover’s share price varies depending on who initiates legal actions and on the nature of the lawsuit filed. DOI: 10.4018/978-1-4666-1960-9.ch016