3.4.1 New trade theory
New trade theory as set out by Hill (2005) is important because it incorporates the concept of the first-mover (also known as prime-mover). The first-mover concept argues that the first company to enter any field is able to shape consumer preferences and to achieve economies of scale. These benefits tend to discourage new entrants or to put them at a cost disadvantage should they enter the market despite the barriers to entry.
The case cited in your textbook (Hill 2005, p. 163) is that of the Boeing Company which has dominated the commercial jet aircraft industry since its inception. Boeing was lucky. Had it not been for metal fatigue in the wing which caused a number of fatal crashes, the British De Havilland company's Comet aircraft may have paved the way for De Havilland to be the industry leader. We shall return to the case of Boeing in Part B of this chapter, but finally, in Part A, we look at Porter's theory of competitive advantage.
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