Abstract
It is not difficult to find examples where consumers discount a second mover’s copying as being inauthentic. In contrast, however, there are also cases where followers’ copying doesn’t seem to be a problem. But some firms do not face such a criticism even when they enter the market later and provide products based on early movers’ idea. Why and when do consumers discount second movers as inauthentic? The answer, according to our research, concerns the process of attaining the market position. In our study published in Organization Science, my co-authors Stine Grodal (Northeastern University) and Ezra W. Zuckerman Sivan (MIT Sloan) and I show that late entrants often suffer what we call an inauthenticity discount – a penalty rooted not in what they offer, but in how they came to offer it.
When a company enters a brand-new industry, it faces a daunting task. There is no established trust, no regulatory framework, no proof that the business model even works. Early entrants must convince skeptical customers, regulators, and partners that the new form of business is reliable and worth their time. We call this “legitimation work” – the costly, risky effort of making a new market credible. Once that hard work pays off, later entrants can simply walk into a market that someone else made safe and acceptable. They adopt the same model, avoid the risks, and reap the rewards. It’s an efficient and safe way of starting a business – but audiences notice. Our empirical evidence suggests that consumers approve of firms that have made efforts to legitimize a new industry from scratch. Those that free-ride on that “legitimation work” are seen as less authentic.