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Why Quality May Not Always Win: The Impact of Product Generation Life Cycles on Quality and Network Effects in High-tech Markets

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  • Gretz, Richard T.
  • Basuroy, Suman

Abstract

Marketing literature has recently witnessed major debates about the critical drivers of success – namely, the quality versus network effect, in high-tech markets as well as the efficiency of such markets. Extant research suggests that both quality and network effects are significant factors determining market share in these markets, but that quality effect is more important. Based on surveys of several retail managers and a new dataset on the US video game industry from 1995 to 2007, we replicate and extend this research in several directions: (1) we replicate and confirm prior results that both quality and network effects are critical drivers of market share; (2) network and quality effects vary over the product generation life cycle, and hence, quality does not always win; and (3) in the Growth and Maturity phases of the product generation life cycle, network effects can trump quality effects. Our empirical results provide some practical insights for retail managers.

Suggested Citation

  • Gretz, Richard T. & Basuroy, Suman, 2013. "Why Quality May Not Always Win: The Impact of Product Generation Life Cycles on Quality and Network Effects in High-tech Markets," Journal of Retailing, Elsevier, vol. 89(3), pages 281-300.
    • Handle: RePEc:eee:jouret:v:89:y:2013:i:3:p:281-300
    DOI: 10.1016/j.jretai.2013.05.002
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    9. Marchand, André & Hennig-Thurau, Thorsten, 2013. "Value Creation in the Video Game Industry: Industry Economics, Consumer Benefits, and Research Opportunities," Journal of Interactive Marketing, Elsevier, vol. 27(3), pages 141-157.
    10. Rietveld, G.J. & Eggers, J.P., 2016. "Demand Heterogeneity and the Adoption of Platform Complements," ERIM Report Series Research in Management ERS-2016-003-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
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    12. Saeed Khanagha & Shahzad (Shaz) Ansari & Sotirios Paroutis & Luciano Oviedo, 2022. "Mutualism and the dynamics of new platform creation: A study of Cisco and fog computing," Strategic Management Journal, Wiley Blackwell, vol. 43(3), pages 476-506, March.
    13. Daniel Arce, 2023. "Platform break-even market share," Marketing Letters, Springer, vol. 34(4), pages 713-725, December.
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