Internet companies' growth strategies

To exploit first mover advantages, pioneers may be motivated to amass customers before rivals enter the market. Likewise, when they enjoy increasing returns due to network effects, static scale economies, or learning effects, companies have incentives to invest aggressively in upfront marketing. This paper presents econometric analysis of factors that determined the intensity of Internet companies' investments in growth, and analyzes the long term economic consequences of such investments. Results indicate that first movers spent significantly more on upfront marketing than non-pioneers. Contrary to expectations, however, firms in markets that exhibited increasing returns did not spend more on their early customer acquisition efforts than other sample companies.