Entrepreneurial Innovations in Network Industries
AbstractIn this paper, we study entrepreneurial innovations in an industry characterized by network effects. We show that the presence of network externalities tends to make the entrepreneur prefer sale to entry. Moreover, we also show that the incentive to innovate for entry decreases when network effects become stronger, whereas there is an increase in the incentive for innovation for sale. Moreover, we show that increasing the degree of industry-wide standardization furthers the goal of increasing entry by entrepreneurs. However, this may come at the cost of reducing the research intensity by reducing the bidding competition among incumbents over the innovations of entrepreneurs.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 08-02.
Length: 29 pages
Date of creation: Sep 2008
Date of revision:
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Web page: http://www.NETinst.org/
Entrepreneurship; Entry; Compatibility; Innovation; Network Effects; Standardization;
Find related papers by JEL classification:
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-10-21 (All new papers)
- NEP-COM-2008-10-21 (Industrial Competition)
- NEP-CSE-2008-10-21 (Economics of Strategic Management)
- NEP-ENT-2008-10-21 (Entrepreneurship)
- NEP-INO-2008-10-21 (Innovation)
- NEP-MIC-2008-10-21 (Microeconomics)
- NEP-NET-2008-10-21 (Network Economics)
- NEP-SOC-2008-10-21 (Social Norms & Social Capital)
- NEP-TID-2008-10-21 (Technology & Industrial Dynamics)
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