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How Cannibalistic is the Internet Channel?

  • Deleersnyder, B.
  • Geyskens, I.
  • Gielens, K.
  • Dekimpe, M.G.

During the past decade, irrational exuberance has turned into a possibly equally irrational pessimism about what the Internet can accomplish. The fear of getting ruined through cannibalization losses has recently deterred many firms from deploying the Internet as a distribution channel. But do Internet channels really cannibalize firms' entrenched channels, or is this widely held assumption exaggerated? To answer this question, we apply recent structural-break time-series econometrics to quantify the impact of an Internet channel addition on the long-run performance evolution of a firm's established channels. Using a database of 85 Internet channel additions over the last ten years in the British and Dutch newspaper industries, we find that the often-cited cannibalization fears have been largely overstated. The Internet therefore need not be disruptive to established companies and channels. This does, however, not imply that firms enjoy free play in setting up Internet channels. In cases where the newly established Internet channel too closely mimics the entrenched channels, substantial cannibalization is more likely to take place.

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File URL: http://repub.eur.nl/pub/171/ERS-2002-22-MKT.pdf
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Paper 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 ERIM Report Series Research in Management with number ERS-2002-22-MKT.

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Date of creation: 27 Feb 2002
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Handle: RePEc:ems:eureri:171
Contact details of provider: Postal: RSM Erasmus University & Erasmus School of Economics, PoBox 1738, 3000 DR Rotterdam
Phone: 31-10-408 1182
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