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Competing Technologies in the Database Management Systems Market

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  • Tobias Kretschmer

Abstract

In this paper, we study the dynamics of the market for Database Management Systems (DBMS), which is commonly assumed to possess network effects and where there is still some viable competition in our study period, 2000 - 2004. Specifically, we make use of a unique and detailed dataset on several thousand UK firms to study individual organizations' incentives to adopt a particular technology. We find that there are significant internal complement effects - in other words, using an operating system and a DBMS from the same vendor seems to confer some complementarities. We also find evidence for complementarities between enterprise resource planning systems (ERP) and DBMS and find that as ERP are frequently specific and customized, DBMS are unlikely to be changed once they have been customized to an ERP. We also find that organizations have an increasing tendency to use multiple DBMS on one site, which contradicts the notion that different DBMS are near-perfect substitutes.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0737.

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Date of creation: Aug 2006
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Handle: RePEc:cep:cepdps:dp0737

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: Database software; indirect network effects; technology adoption; microdata;

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  1. Erik Brynjolfsson & Chris F. Kemerer, 1996. "Network Externalities in Microcomputer Software: An Econometric Analysis of the Spreadsheet Market," Management Science, INFORMS, INFORMS, vol. 42(12), pages 1627-1647, December.
  2. Neil Gandal, 1994. "Hedonic Price Indexes for Spreadsheets and an Empirical Test for Network Externalities," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 160-170, Spring.
  3. Farrell, Joseph & Saloner, Garth, 1986. "Standardization and variety," Economics Letters, Elsevier, Elsevier, vol. 20(1), pages 71-74.
  4. Neil Gandal & Shane GreenStein & David Salant, 1997. "Adoptions and Orphans in the Early Microcomputer Market," CARE Working Papers, The University of Texas at Austin, Center for Applied Research in Economics 9705, The University of Texas at Austin, Center for Applied Research in Economics.
  5. Gandal, N. & Kende, M. & Rob, R., 1997. "The Dynamics of Technological Adoption in Hardware/Software Systems: The Case of Compact Disc Players," Papers, Tel Aviv 21-97, Tel Aviv.
  6. Shane M. Greenstein, 1993. "Did Installed Base Given an Incumbent Any (Measurable) Advantages in Federal Computer Procurement?," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 19-39, Spring.
  7. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 99(394), pages 116-31, March.
  8. Kretschmer, Tobias, 2004. "Upgrading and niche usage of PC operating systems," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 22(8-9), pages 1155-1182, November.
  9. Lerner, Josh & Tirole, Jean, 2002. "Some Simple Economics of Open," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 50(2), pages 197-234, June.
  10. Heli Koski & Tobias Kretschmer, 2005. "Entry, standards and competition : firm strategies and the diffusion of mobile telephony," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 801, London School of Economics and Political Science, LSE Library.
  11. Hiroshi Ohashi, 2003. "The Role of Network Effects in the US VCR Market, 1978-1986," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 12(4), pages 447-494, December.
  12. Thomas Astebro, 2004. "Sunk Costs and the Depth and Probability of Technology Adoption," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 52(3), pages 381-399, 09.
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