ARTICLE IN PRESS

Telecommunications Policy 33 (2009) 339–347

Contents lists available at ScienceDirect

Telecommunications Policy
URL: www.elsevierbusinessandmanagement.com/locate/telpol

Competitive behavior in the European mobile telecommunications

industry: Pioneers vs. followers
Zulima Fernández 1, Belén Usero 
Universidad Carlos III de Madrid, C/Madrid, 126, 28903 Getafe, Madrid, Spain

a r t i c l e in fo abstract

This paper studies the relationship between competitive strategy and improvement in
Keywords: the competitive position of pioneers and followers in the mobile telecommunications
Mobile telecommunications industry. The analysis uses a panel of data comprising all the actions of European firms
Pioneer advantage operating in the digital mobile telecommunications industry with GSM 900 and/or DCS
Competitive strategies 1800 networks. The results show that competitors gain market share when they follow
Competition competitive strategies that are different from those of other firms. The paper also finds
that price reduction actions represent the best approach for followers, while
differentiation actions are the most effective strategy for pioneers.
& 2009 Elsevier Ltd. All rights reserved.

1. Introduction

Pioneer advantage has been much researched over the last 20 years. Although the results are not yet conclusive, the research
seems to indicate that the sustainability of pioneer advantage is contingent on a series of factors, especially environmental
dynamism (Suarez & Lozolla, 2007), industry structure (Derfus, Maggith, Grimm, & Smith, 2008), firm resources (Klepper &
Simons, 2000) and the competitive strategies employed by pioneers and followers (Covin, Slevin, & Heeley, 1999).
This paper continues this line of research by analyzing the relationship between competitive strategy and improvement
in the competitive position of pioneers and followers in the European mobile telecommunications industry. In particular,
this work studies the relationship between different types of competitive behavior and gain in market share.
Competitive strategy is the pattern of actions that a firm employs to achieve and maintain its competitive advantage
(Zott & Amit, 2008). Competitive actions are specific and observable actions by all industry agents that are taken by a firm
to defend or improve its competitive position (Smith, Ferrier, & Ndofor, 2001). Prior research demonstrates that market
actions affect the market position of firms (Ferrier, Smith, & Grimm, 1999) and their financial performance (Lee, Smith,
Grimm, & Schomburg, 2000; Young, Smith, & Grimm, 1996). The competitive behavior of pioneers and followers, however,
has not received much attention (with the exception of De Castro & Chrisman, 1995). For this reason, then, this paper sets
out to answer two questions: (a) Is it better for all competitors to follow the same pattern of action, or should they adopt
heterogeneous behavior? (b) What types of actions are more effective for pioneers and followers?
The European mobile telecommunications industry has developed in parallel with the gradual entry of competitors. These
competitors have consolidated and improved their market positions in different ways. In some cases, operators have employed
similar actions to their competitors, in others they have preferred to follow different strategies. In Spain, for example, Amena
(now Orange) adopted a price-focused strategy, while Telefónica Móviles concentrated on innovation and new products. In
Denmark, however, Telia (now TeliaSonera) copied the actions of the pioneer Tele-Denmark (now TDC Mobile).

 Corresponding author. Tel.: +34 91 6245822; fax: +34 91 6245707.

E-mail addresses: zulima@emp.uc3m.es (Z. Fernández), busero@emp.uc3m.es (B. Usero).
1
Tel.: +34 91 6249575; fax: +34 91 6245707.

0308-5961/$ - see front matter & 2009 Elsevier Ltd. All rights reserved.
doi:10.1016/j.telpol.2009.03.004
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Both strategies bring advantages and disadvantages for firms, and theoretical justification exists for each one. The
resource-based view defends the need for pioneers and followers to adopt different behaviors. Firms have different
resource endowments that enable them to construct specific competitive advantages over competitors (Barney, 1991;
Peteraf, 1991). This allows them to be different, and being different reduces competition and makes it possible to reach new
segments of the market. In contrast, New Institutionalism defends the advantages for operators of using the same type of
actions. This approach finds that being similar provides legitimacy (Di Maggio & Powell, 1983), which is crucial to capture
clients, qualified employees and financial resources in emerging industries (Aldrich & Fiol, 1994), and which in turn
increase new entrants’ chances of survival (Deephouse, 1999).
Notable differences are also evident in the types of actions used by operators. Since 1999 and 1997, respectively, One in
Austria and Esat Digifone (now O2) in Ireland, for example, have preferred price-related actions: lowering prices,
eliminating charges for new subscribers and subsidizing mobile terminals. In contrast, Omnitel (now Vodafone) in Italy and
Bouygues in France, since 1995 and mid-1996, respectively, have opted for other types of actions. They have invested
heavily in enlarging and upgrading their networks, and in launching new WAP services (payments by mobile, video games,
music downloads, etc.) for private and business clients, and the public administration.
Pioneers normally use differentiation actions such as highlighting product developments, product and service quality,
and technology (Miller, 1988; Robinson & Chiang, 2002). Recommendations on the best strategy for followers are more
varied. In many cases, followers are only able to erode pioneer advantage by innovating, thus obliging them to use
differentiation actions (Robinson & Chiang, 2002; Shankar, Carpenter, & Krishnamurthi, 1998). Other research, however,
shows the effectiveness of price strategies (Lambkin, 1988; Miller, 1988). Followers may have lower costs because they take
advantage of free rider effects and learn from the mistakes made by pioneers (Lieberman & Montgomery, 1988). Even if this
is not the case, when buyer-switching costs are present followers can exploit the experience effect via price-cutting
strategies that reward clients who change suppliers. It is necessary, then, to evaluate what types of actions are more
effective for pioneers and followers.
In summary, firms follow different competitive behaviors, thus raising the question of which behaviors are the most
effective at winning clients in the early developmental phases of the mobile telephone industry.
To answer these research questions, this paper uses a panel of data of the competitive actions taken by European mobile
telecommunications operators between 1997 and 2000. The sample includes European firms that operate in the digital
mobile telecommunications industry with GSM 900 and/or DCS 1800 networks. This sample avoids the problem of pioneer
identification as governments control entry to the industry. The state grants a license to operate and thereby establishes the
order of entry; firms do not define themselves as pioneers or followers as occurs in other research (Robinson & Fornell,
1985; Brown and Lattin, 1994).
The paper is set out as follows. First, the theoretical framework underpinning the research questions is explained.
Specifically, the paper examines two opposing points of view: New Institutionalism and the resource-based view. The
subsequent sections present our methodology and results. Lastly, the final section discusses these results and draws some
general conclusions.

2. Competition in the mobile telecommunications industry

The competitive behavior employed by pioneers and followers affects their competitive positions. Competitive actions
such as price reductions or the launch of new products or services help firms to develop temporary or permanent
competitive advantages (Porter, 1980). These actions enable a firm to put its strategy into effect, and thereby consolidate its
competitive position or attack its rivals. Specifically, a pioneer will take actions to consolidate and improve its market
position, while a follower will take actions to erode pioneer advantage and to gain a foothold in the market.
Competitive activity in the European mobile telecommunications industry has grown continuously since the arrival of
digital technology and the disappearance of state monopolies. Some operators copied competitive actions from competitors,
while others opted for competitive actions that deviate from industry practices. Theoretical justification exists for both
strategies: New Institutionalism supports the first strategy, while the resource-based view provides the backing for the
second. In accordance with this, some operators have chosen to concentrate on price actions, while others have focused on
differentiation actions such as innovation, product features, reputation and brand image, networks, and customer service.
This leads us to pose the following research questions about improving the competitive position of pioneers and followers:

(a) Is it better to copy the behavior of competitors, or to be different?

(b) What types of actions are best for pioneers and followers?

2.1. To be heterogeneous or not?

New entrants must consolidate their position in the market. To do this they need resources, which can only be acquired
by firms that possess legitimacy (Di Maggio & Powell, 1983). Legitimacy is fundamental to being able to compete – even
survive – as it paves the way to client acceptance and environmental support from, for example, investors. The basic
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premise of New Institutionalism is that successful firms will be those that gain legitimacy by conforming to external social
pressures exerted by government, competitors, professional associations and other interest groups that define the socially
acceptable behavior (Oliver, 1997). For this reason, then, operators wishing to consolidate their positions should look to
increase their legitimacy, and the best way of achieving this is by doing the same as the other competitors.
Deephouse (1996) demonstrates the relationship between isomorphism and legitimacy conferred by regulators and
media. Empirical research also finds that competitive similarity between a firm and its rivals has a positive and significant
effect on the focal firm’s reputation (Basdeo, Smith, Grimm, Rindova, & Derfus, 2006), while competitive dissimilarity
reduces financial performance (Miller & Chen, 1996; Yeung & Lau, 2005).
Five main sources of firm homogeneity exist (Oliver, 1997): regulatory pressures, strategic alliances, human capital
transfers, social and professional relations and competency blueprints. All of them may be at work in the mobile
telecommunications industry. First, as this is a highly regulated industry, firms must comply with a multitude of standards.
Second, almost all operators use the same technology and equipment suppliers, thus raising the likelihood that they will
introduce identical innovations and value-added services. Third, a limited number of operators work in the industry in each
country, and the managers of these operators share similar backgrounds, move among firms in the industry and
consequently often know one another. These are all factors that contribute to a type of ‘group think’ among managers,
which produces a normative isomorphism. Fourth, competency blueprints (or mimetic isomorphisms) result from the
direct imitation of a successful competitor or from the use of external consultants. The high uncertainty in a young industry
like the mobile telecommunications industry promotes the copying of successful strategies and consensus on which
strategies work best. Lastly, external consultants are also responsible for the reduction of diversity among firms, as they
tend to use the same models for all of their clients in the mobile telecommunications industry (Di Maggio & Powell, 1983).
New Institutionalism sees this homogenization of behavior as a way for operators to improve their competitive positions.
This view, however, is not universally accepted, and some empirical research pointing in the opposite direction exists.
Caves and Ghemawat (1992) show that firms with highly different competitive behaviors from those of their rivals are able
to distinguish themselves, create mobility barriers, enjoy greater price margins and sometimes even larger market share.
Miles, Snow, and Sharfman (1993) also find that industries in which firms conduct similar strategies are less profitable.
Moreover, doing the same as competitors can reduce performance and increase failure rates (Baum & Sing, 1984).
Firm heterogeneity is the fundamental premise of resource-based view (Peteraf, 1991): each firm develops its own
bundle of tangible and intangible resources. These include all productive factors that are controlled by the firm, such as
physical assets, technology, know-how, brands, reputation, and financial, human and relational resources. The possession
of rare, valuable, unique and not imitable resources (Barney, 1991) – in particular intangible ones – is a source of
competitive advantage. Through the process of entrepreneurial discovery, firms accumulate, combine and employ
resources differently than others and construct a – sometimes only temporary – competitive advantage (Smith et al., 2001).
For the resource-based view, the key to strategic management is allowing firms to find their own ways of constructing and
sustaining competitive advantages in the market – in other words, it is all about being different from the rest. The best way
for a firm to better its competitive position, then, may be to develop its own competitive behavior and not simply repeat
competitors’ actions.

2.2. Types of competitive actions

The next question to consider is what types of competitive actions are most effective. Two basic types of actions exist:
price and differentiation. Price reduction actions are how a cost strategy is put into practice (Mintzberg, 1988). The
reduction of prices makes it possible to enter the market, enlarge the client base and thus reduce costs by both economies
of scale and experience and also network economies (when these are present). Many types of differentiation actions exist,
such as innovation, quality, product features, reputation and brand image, networks and customer service. Firms use these
actions to provide clients with added value in exchange for a higher price.
Pioneers usually offer products of high quality and technology (Miller, 1988; Robinson & Fornell, 1985), with a high level
of customer services (Lambkin, 1988). Moreover, pioneers must continue innovating and introducing new services to
maintain their positions (Robinson & Chiang, 2002). Lastly, research confirms that pioneers with high R&D expenditures
and high-quality service significantly increase their market-share performance (Szymanski, Troy, & Bharadwaj, 1995).
Differentiation actions have also been shown to be useful for followers. The continuous introduction of innovations
allows followers to erode pioneer advantage more easily. Empirical evidence indicates that followers can use innovations to
outgrow (Shankar et al., 1998) and overtake a pioneer (Bohlmann, Golder, & Mitra, 2002, Robinson & Chiang, 2002).
Shamsie, Phelps, and Kuperman (2004) find a positive relationship between the introduction of innovations by followers
and growth in market share. Zhang and Markman (1998) stress that the degree of product innovation determines the
success of followers. Lastly, the pioneer’s stock market valuation falls when followers copy their actions (Lee et al., 2000). In
conclusion and as shown by these prior studies, differentiation actions seem to represent the best way for pioneers and
followers to improve their market positions.
Other theoretical and empirical research, however, suggests that differentiation actions are not the best option.
Differentiation actions free pioneers from the obligation of competing on price (Lambkin, 1988) – something that is not
possible for followers whose product is by definition not unique and who have no reputation or brand image. Therefore,
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competing on a low-price basis may be the best strategy for followers (Covin et al., 1999). Moreover, the growth of the
market will bring an opportunity for followers in the shape of new clients who are more sensitive to price. This type of
actions may be especially effective with price-sensitive clients who only enter the market when it begins to become
consolidated. Price actions, then, are likely to represent the best course of action for followers entering a ‘skimmed’ market
– one in which all the best clients have already been captured by pioneers.
Price reductions should be based on low costs. Although followers a priori do not enjoy a cost advantage over pioneers
(Lambkin, 1988; Miller, 1988), price reductions can compensate for buyer-switching costs and make it possible for them to
exploit the experience effect. Followers may in fact have fewer costs because they learn from the mistakes of the pioneer
and free-ride on the pioneer’s entry costs (Lieberman & Montgomery, 1988). Followers can take advantage of pioneer
innovations and efforts to make their products known to consumers. Thus, followers can enter the market with a low-cost
structure that allows them to undercut pioneer prices.
Lambkin (1988) and Miller (1988) confirm that price reduction strategies help improve the competitive position of
followers. Likewise, Shamsie et al. (2004) find a negative relationship between price and market share in follower firms.
In summary, the review of the literature provides contrasting answers to the two research questions this paper poses.
New Institutionalism defends the advantages of competitors’ adopting homogeneous behavior. In line with this theory, a
number of empirical works on sustaining and eroding pioneer advantage stress the importance of innovation for both
pioneers and followers. In contrast, resource-based view defends heterogeneity among firms as the path to constructing
competitive advantages, specifically that pioneers should adopt differentiation strategies and that followers should adopt
price strategies. Once again, a number of empirical works on pioneers provide support for this position.

3. Methods

3.1. Sample

Data were gathered on the competitive moves of all mobile operators that commercialized services with digital GSM
technology in the European Union, Norway and Switzerland.2 The sample contains 51 mobile telecommunications
operators – 24 pioneers and 27 followers. The period chosen for study was from 1997 to 2000. Annual growth rates in
demand of over 35 percent during this time clearly reflect the dynamism of the industry. All the countries opened their
markets to competition with the arrival of GSM digital technology, but with different degrees of speed. The starting point
was 1997 as this was the first year at least two firms were competing in the digital technology market in all of the
countries. Our cut-off point was 2000 because in 2001 third generation (UMTS) licenses began to be granted.3 At this time,
the number of competitors in national markets in Europe – without counting virtual operators – was between two and five.

3.2. Data collection

The data on operators’ competitive actions were taken from the Lexis/Nexis online database. This database contains a
summary in English of the news reports from the main newspapers – both general and business – in the countries where
the firms operated. The database also collects information from the pan-European trade journals on the telecommunica-
tions industry. The data were collected by applying the ‘structured content analysis’ method (Jauch, Osborn, & Martin,
1980) to the newspapers and journals selected. Previous studies of competitive behavior use this technique (Ferrier et al.,
1999; Young et al., 1996) because it makes it possible to measure competitive moves directly. Six-month periods were used
in order to collect more information on the competition process.
Business professionals and academics helped to select the most common types of actions in the European digital mobile
telecommunications industry. A database was then constructed using the procedure outlined in Table 1.
Of a total of 23,152 articles selected in the second stage, 2153 were coded as competitive actions. The mean number of
actions in a 6-month period per firm was 6.5, with a maximum of 30 and a minimum of 0. The most common actions were
those related to product and/or service improvements; the least common were related to R&D action. Table 2 displays the
descriptive statistics for each type of action.

3.3. Operationalization of variables

3.3.1. Dependent variable

The dependent variable measures the gain in market share (number of clients). It is calculated using the logarithm of a
firm’s market share in one market during two consecutive periods of time (Ferrier et al., 1999). Market-share gain is one of
the primary objectives of firms in the mobile telecommunications industry because of the important network effects it

2
Norway and Switzerland have also been included, as their mobile telecommunications industries are very similar to those of the other countries in
the sample. Luxembourg has not been included as no data were available.
3
Despite the interest in UMTS technology, the huge amount of press speculation about the granting of licenses in 2001 made it increasingly difficult
to collect information on GSM technology from this time.
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Table 1
Data collection procedure.

1. Collection of press releases
2. Reliability of data
3. Coding
All press releases issued by each firm in newspapers and journals between 1997 and 2000 were collected
Three codersa read 10 percent of the news reports and coded those containing information on the types of actions
selected in step two.b Cohen’s Kappa was 0.921, which indicates a high degree of reliability among coders (Neuendorf,
2002)
The coders read all the news reports under study and sorted them into the groups drawn up the experts

a
One of the authors and two properly trained strategic management students coded all the articles.
b
To avoid repetition, only the earliest chronological appearance of a report was retained.

Table 2
Descriptive statistics of competitive actions.

Type of action Example Total Mean Standard dev. Minimum Maximum

Differentiation
New products/services Mobistar launches new SIM 793 2.39 2.58 0 14
cards with improved
services.
R&D France Telecom researches 264 0.79 1.32 0 10
new ways of accessing the
Internet by mobile phone
Expansion of network Telia implements GPRS 500 1.51 1.53 0 7
capacity technology

Price
Price/promotions Omnitel offers a free mobile 596 1.80 2.35 0 13
telephone for new
subscribers

Total 2.153 7.92 6.91 0 41

N ¼ 331 (51 firms, eight 6-month periods).

Fewer than eight data are available for some firms; this is because they began to operate after 1997.

brings (Katz & Shapiro, 1994). The information on clients was obtained from the trade journal Mobile Communications:

Market share gainitc ¼ lnðMSitc Þ  lnðMSiðt1Þc Þ

where i ¼ 1, 2,y,I pioneer and follower firms; t ¼ 1, 2,y, T periods; c ¼ 1, 2,y, C countries; MS ¼ market share.
A positive value for this variable indicates that the firm has improved its competitive position in the period; a negative
value indicates that its position has worsened.

3.3.2. Independent variables

Three independent variables are used to describe the competitive behavior of pioneer and follower firms (Basdeo et al.,
2006; Ferrier et al., 1999):
Competitive heterogeneityitc is calculated using the Neperian logarithm of squared Euclidean distance of the firm ‘i’
compared with the mean of its rivals in a specific period and country:

!
X
2
CHitc ¼ ln ½ðCApitc =CAitc Þ  ðCApmeantc =CAmeantc Þ Þ
p

where CAcitc/CAitc is the proportion of type ‘p’ actions (compared with the total) that the firm ‘i’ takes in a specific period.
CAc(Ii)c/CAmeantc is the proportion of type ‘p’ actions (compared with the total) that all the firms except firm ‘i’ take in a
specific period.
A high score for this variable indicates that the competitive behavior of the firm ‘i’ is different from that of its
competitors in the market.
Differentiation actionsitc is calculated as the total number of competitive actions taken by a firm in a specific period and
country related to the launch of new products/services, R&D and the expansion of network capacity.
Price actionsitc is calculated as the total number of competitive actions taken by a firm in a specific period and country
related to price reductions and special offers.
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3.3.3. Control variables

Previous research suggests that several industry specific variables influence firm performance. This study includes the
following control variables:
Market growthtc: The growth rate of users of mobile telecommunications services compared with the previous period.
This is important as competitors in growing markets have less stable market shares.
Monopolytc: The months in which a monopoly with GSM digital technology has existed in country ‘c’.
Penetrationtc: The percentage of the population with mobile telecommunications service. This is used as a measure of
the degree of market maturity.
Concentrationtc: The sum of each competitor’s market share squared in a specific market and period. This is an indicator
of the industry’s degree of competition.
Analog experiencei: A dichotomous measure that takes value 1 if the firm has experience with the previous technology;
otherwise it takes value 0.
CM_1i(t1)c: The market share of firm ‘i’ in the previous period.

3.4. Model specification

All hypotheses were tested using linear regression analysis. The analysis of longitudinal data with ordinary least squares
is subject to violations of the conventional suppositions, mainly heterocedasticity and auto-correlation. Not taking account
of these problems may cause the estimations to be biased, resulting in an inflated statistical F value (Bergh & Holbein,
1997). The Cook–Weisberg statistic indicated the presence of heterocedasticity when using models of ordinary least
squares. To get around this problem, the study used generalized least squares regression (GLS) – specifying that the error
structure was heterocedastic – to ensure that the standard errors were robust. After first transforming the data using the
Prais–Winsten procedure, generalized least square estimations were performed to study the possible presence of serial
correlation. As the estimations were significantly worse, serial correlation in the data is unlikely.
Another possible problem is multicollinearity between the dependent and independent variables. Table 3 includes the
correlations for all the variables. Although the majority of the correlation coefficients have moderate values, the variance
inflation factors were calculated for all the variables and none of them was higher than 2. As values up to 10 are permitted
(Nester, Wasserman, & Kutner, 1985), multicollinearity is not a problem in this study.
The model is lagged 1 year (two periods) to examine directly the casual linkage hypothesized between firm activity and
market-share gain (Yeung & Lau, 2005; Young et al., 1996). The lagged dependent variable model provides a more robust
test of the effects of organizational strategic activities on performance (Lee et al., 2000).

4. Results

Table 4 displays the GLS regression analyses of the effect of pioneer and follower competitive behavior on gain in market
share. Model 1 is the baseline control, including control variables that may affect gain in market share relative to industry
and firm. Model 2 captures the effect of the variable ‘competitive heterogeneity’. In models 3 and 4, the sample has been
divided into two groups: pioneers and followers. The effect of competitive action type (differentiation or price) on gain in
market share has been calculated for both groups. All the models are significant to 99 percent.
In model 2, the coefficient for the variable ‘competitive heterogeneity’ is strongly statistically significant and positive
(b ¼ 1.254, p-value o0.000). This result indicates that firms improve their competitive positions when they adopt a
different competitive behavior from that of their rivals.
Concerning type of actions, in model 3, the coefficient for the variable ‘differentiation actions’ is significant and positive
(b ¼ 0.055, p-value o0.000). This confirms that pioneer firms are able to gain market share when they use this type of
action. In model 4, the coefficient for the variable ‘price actions’ is partially significant and positive (b ¼ 0.040, p-value
o0.01), thus confirming that followers are able to gain market share with this type of action.

Table 3
Correlation matrix.

1 2 3 4 5 6 7 8 9

1. Competitive heterogeneityitc 1
2. Differentiation actions itc 0.39 1
3. Price actionsitc 0.24 0.8 1
4. Market growthtc 0.05 0.04 0.23 1
5. Monopolytc 0.08 0.07 0.15 0.13 1
6. Penetrationtc 0.10 0.13 0.23 0.49 0.04 1
7. Concentrationtc 0.16 0.08 0.05 0.11 0.52 0.24 1
8. Analog experiencei 0.01 0.7 0.06 0.01 0.06 0.03 0.07 1
9. CM_1i(t1)c 0.04 0.18 0.05 0.09 0.16 0.14 0.35 0.68 1
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Table 4
Empirical model of competitive behavior and gain in market share.

Variables Model 1: base Model 2: competitive heterogeneity Model 3: action types ‘pioneers’ Model 4: action types ‘followers’

b Dev. T b Dev. T b Dev. T b Dev. T

Competitive heterogeneityitc 1.254*** 0.372

Differentiation actions itc 0.055*** 0.0165 0.016 0.0187
Price actions itc 0.026 0.033 0.040* 0.023
Market growthtc 0.008* 0.003 0.005* 0.002 0.008* 0.005 0.007* 0.003
Monopolytc 0.002 0.003 0.001 0.002 0.002 0.005 0.004* 0.003
Penetrationtc 0.014*** 0.002 0.013*** 0.002 0.021*** 0.004 0.008** 0.003
Concentrationtc 2.835*** 0.541 2.31*** 0.283 4.024*** 1.089 1.645** 0.5885
Analog experiencei 0.191 0.124 0.064 0.075 0.174 0.170 0.014 0.245
CM_1i(t1)c 0.001 0.003 0.001 0.002 0.004 0.008 0.006 0.004
Constant 14.838*** 0.305 14.838*** 0.305 15.240*** 0.500 14.050*** 0.359
Observations 331 331 180 151
w2 Wald 95.00 276.65 75.18 56.78
(p-Value) (0.000) (0.000) (0.000) (0.000)

Significance levels: *po0.1, **po0.05 and ***po0.001.

Of the control variables, the coefficient for ‘market growth’ is positive and partially significant for pioneers and followers
(b ¼ 0.008, p-value o0.1). In other words, the growing demand for mobile telecommunications services benefits all firms.
The coefficient of the variable ‘penetration’ is also significant and negative (b ¼ 0.014, p-value o0.000), thus showing that
all firms find it more difficult to win clients when the market is saturated. Lastly, the coefficient for ‘concentration’ is
significant and negative (b ¼ 2.835, p-value o0.000), which indicates that it is more difficult to gain market share in
concentrated markets. In addition, the coefficient for ‘monopoly’ is partially significant and negative for followers
(b ¼ 0.004, p-value o0.1). The longer pioneers enjoy a monopoly, then, the more difficult it is for followers to win clients.

5. Discussion and conclusions

The European mobile telecommunications industry has developed hugely since the arrival of digital technology and the
opening of markets to competition. This has presented the operators in such a new and dynamic industry with both
opportunities and challenges. In response to this situation, firms have used different strategies to improve their
competitive positions. This paper poses two specific questions about these strategies:

(a) Is it better to copy the behavior of competitors or to be different?

(b) What types of actions are best for pioneers and followers?

The characteristics of the industry – young and very regulated, with a small number of highly interrelated firms that use
the same suppliers and swap managers with comparable profiles – seem to push operators towards using similar
strategies. Imitation is a rational alternative when uncertainty is high. And imitating the strategy of competitors provides
legitimacy, which in turn makes it easier to obtain necessary resources. This is not the only alternative, however. Other
approaches suggest the need for firms to adopt different strategic behaviors – something that the findings of this paper
confirm. Our results show that operators improve their positions when they adopt different strategies from those of their
rivals. In conclusion, competitive heterogeneity contributes to improving competitive position in the early developmental
stages of the European digital mobile telecommunications industry.
Our analysis of the effects of different competitive actions confirms that price reduction actions represent the best
approach for followers and that differentiation actions (such as launching new products and services or enlarging and
upgrading networks) are the most effective strategy for pioneers.
Another open question is whether pure competitive strategies – those based on differentiation or price actions – are
best. Or whether mixed strategies including all types of actions are more effective. Porter (1980) defends the position that
firms with pure competitive strategies exhibit superior performance, while those that are ‘stuck in the middle’ invariably
end up with inferior results. The literature on this point, though, is divided. Several empirical works confirm the
effectiveness of pure strategies (Dess & Davis, 1984), while others confirm the value of a mixed approach. De Castro and
Chrisman (1995), for example, find that pioneers with mixed strategies (what they call ‘utility strategies’) outperform
pioneers with pure strategies. To check this finding, our research performed additional tests on the effectiveness of mixed
strategies for pioneers and followers and found that the effect of using many types of actions – a mixed strategy – is lower
than when the actions are studied separately. This confirms, then, that it is better for pioneers to focus on differentiation
actions and for followers to concentrate on price actions, instead of mixing all types of actions.
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Several reasons for opting for pure competitive strategies exist (Thornhill & White, 2007). Chief among them is the
vulnerability of mixed strategies to attack by competitors using a simpler behavior. Mixed strategies are also complex,
which makes it difficult to establish priorities and causes loss of direction.
In summary, our results consistently indicate that adopting different competitive behaviors is the most effective
strategy for pioneers and followers. Specifically, differentiation is the best strategy for pioneers, and price is the best
for followers.
The characteristics of the industry are also important. Previous studies showing the advantages for competitors of using
similar actions analyze mature industries such as airlines and hotels (Miller & Chen, 1996; Yeung & Lau, 2005). In our
research, the mobile telecommunications industry is growing in the period under study. And in growing industries
business traditions do not exist and firms tend to be young, which both hamper homogeneity. Moreover, no clear
mechanisms for dissemination exist as occur in mature industries. This situation may change, of course, as the industry
matures.
Anecdotal evidence on the current state of the mobile telecommunications industry seems to indicate that the
competitive behavior of operators is converging. All operators tend to use complex patterns of behavior that offer a growing
range of services along with price reductions in the segments that are most sensitive to the competition. Despite this,
market leaders – usually the pioneers – make great efforts to stress innovations, while the rest of the competitors tend to
highlight prices, even if in practice these are not much different from those of their competitors.
The characteristics of our sample enable it to avoid two of the critical drawbacks of previous studies (Lieberman and
Montgomery, 1988). Most research focuses on US firms without considering whether the results may be generalizable to
other countries. Our sample contains firms from countries in the European Union, Norway and Switzerland. In addition, the
sample is devoid of the bias typical of most first-entrant studies. As firms were only able to enter the market when
governments granted them licenses, the problem of endogeny does not occur.
This paper is not free from limitations. The use of market share as a measure of performance has been criticized because
it inflates the chances of finding pioneer advantages (VanderWerf & Mahon, 1997). Replicating the study with another
measure of results would be desirable. Using measurements of financial performance for a multi-country study like this
one, though, is difficult as accounting practices differ from country to country. In addition, the method of calculating
competitive activity – the number and different types of actions taken – does not provide information on the relative
importance of the actions (it would be useful to distinguish, for example, between a price reduction of 20 percent and one
of 2 percent). Numerous studies, however, adopt this approach (Smith et al., 2001) in highly competitive industries where
every initiative is easily copied, thus indicating that the number of competitive actions does provide a reasonable idea of
how firms act. Lastly, working with a larger sample would be interesting. This would make it possible to corroborate the
persistence of pioneer and follower behavior over time.
The practical implications of this paper are clear: pioneers and followers should adopt different strategic behaviors, at
least in the first developmental stage of an industry. Pioneers should concentrate on differentiation actions that improve
the quality and variety of their services. Followers, however, should look to be different by using other types of actions that
target the most price-sensitive segments of the market.

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