Indirect Network Effects in New Product Growth
AbstractIndirect network effects are of prime interest to marketers because they affect the growth and takeoff of software availability for, and hardware sales of, a new product. While prior work on indirect network effects in the economics and marketing literature is valuable, these literatures show two main shortcomings. First, empirical analysis of indirect network effects is rare. Second, in contrast to the importance the prior literature credits to the chicken-and-egg paradox in these markets, the temporal pattern â€“ which leads which? â€“ of indirect network effects remains unstudied. Based on empirical evidence of nine markets, this study shows, among others, that: (1) indirect network effects, as commonly operationalized by prior literature, are weaker than expected from prior literature; (2) in most markets we examined, hardware sales leads software availability, while the reverse almost never happens, contradicting existing beliefs. These findings are supported by multiple methods, such as takeoff and time series analyses, and fit with the histories of the markets we studied. The findings have important implications for academia, public policy and management practice. To academia, it identifies a need for new, and more relevant, conceptualizations of indirect network effects. To public policy, it questions the need for intervention in network markets. To management practice, it downplays the importance of the availability of a large library of software for hardware technology to be successful.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by 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. in its series Research Paper with number ERS-2007-019-MKT.
Date of creation: 28 Mar 2007
Date of revision:
Contact details of provider:
Web page: http://www.erim.eur.nl/
Chicken-and-Egg; New Product Growth; Indirect Network Effects; Takeoff;
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Stefan Stremersch & Eitan Muller & Renana Peres, 2010. "Does new product growth accelerate across technology generations?," Marketing Letters, Springer, vol. 21(2), pages 103-120, June.
- Everdingen, Y.M. van & Fok, D. & Stremersch, S., 2008. "Modeling Global Spill-Over of New Product Takeoff," Research Paper ERS-2008-067-MKT, 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 Uni.
- Claussen, Jörg & Falck, Oliver & Grohsjean, Thorsten, 2010.
"The Strength of Direct Ties: Evidence from the Electronic Game Industry,"
Discussion Papers in Business Administration
11745, University of Munich, Munich School of Management.
- Claussen, Jörg & Falck, Oliver & Grohsjean, Thorsten, 2012. "The strength of direct ties: Evidence from the electronic game industry," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 223-230.
- Claussen, Jörg & Falck, Oliver & Grohsjean, Thorsten, 2010. "The Strength of Direct Ties: Evidence from the Electronic Game Industry," Discussion Papers in Business Administration 12298, University of Munich, Munich School of Management.
- Hess, Thomas & Grau, Christoph & Dörr, Jonathan, 2008. "Download-Angebote für Musik: Hintergründe, Bedeutung und Perspektiven," Working Papers 2/2008, University of Munich, Munich School of Management, Institute for Information Systems and New Media.
- Narayanan, V.K. & Chen, Tianxu, 2012. "Research on technology standards: Accomplishment and challenges," Research Policy, Elsevier, vol. 41(8), pages 1375-1406.
- Yutaka Hamaoka, 2009. "Spatial Diffusion of Innovation: A Spatial Panel Analysis of Electronic Toll Collecting Transponders in Japan," Keio/Kyoto Joint Global COE Discussion Paper Series 2009-017, Keio/Kyoto Joint Global COE Program.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ERIM Series Handler at the ERIM Office).
If references are entirely missing, you can add them using this form.