Marketing and R&D Investment of Leader vs. Follower

How do a leader and a follower use marketing and R&D differently for resource accumulation, and why? To address the question, we investigate asymmetric incentive structures with respect to marketing and R&D for a leader vs. a follower. In particular, we analyze the resource accumulation paths of Intel and AMD by utilizing 28-year quarterly time series data (1972-1999). In so doing, we adopt Structural Vector-Autoregressive (SVAR) modeling approach, dealing with two methodological challenges, i.e., context dependence and dynamic interdependence. Overall, we find that the leader (Intel) benefits more from its investment in marketing than the follower (AMD), while the follower gains more from its investment in R&D than the leader, consistent with the theoretical prediction. We also find that when the firm’s market value unexpectedly increases the leader increases its marketing investment while the follower chooses to invest in R&D. Unlike the conventional First-Mover (Dis)Advantage research which focuses on the timing of entry, our study suggests that a firm, once having entered, may be better off by choosing different resource accumulation paths for marketing and R&D, based on its current market position. Finally, our results imply that there is no single best strategy; context determines what strategy