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Bandwagon E陇ects in High Technology Industries
... It is widely recognized that a critical mass (Rohlfs, 1974Rohlfs, , 2001 Reinganum, 1981; Cabral, 1990; Shapiro and Varian, 1999) of users or complementary products must be established in order for growth to continue in industries that display strong initial direct or indirect network effects (Katz and Shapiro, 1985; Arthur, 1994; Katz and Shapiro, 1994; Ryan and Tucker, 2006). In industries that display strong initial direct network effects, a critical mass of users is needed for users to receive sufficient value from the use of products such as the telephone, fax machine, or social networking formation and it recognizes that solutions are emerging in western markets that are different from those used in the Japanese market. ...
... For example, a critical mass of software emerged for some PCs (Langlois, 1992) while such a critical mass never emerged for AT&T's Picture Phone Service (which displays direct network effects). Similarly, a critical mass of complementary products did not emerge for digital audiotape, digital compact cassette, mini-discs, high-definition television (Rohlfs, 2001; Grindley, 1995), and AM stereo (Shapiro and Varian, 1999). One reason a critical mass of complementary products did not emerge for the latter products was because firms were not able to agree on standards (Grindley, 1995; Shapiro and Varian, 1999; Rohlfs, 2001). ...
... Similarly, a critical mass of complementary products did not emerge for digital audiotape, digital compact cassette, mini-discs, high-definition television (Rohlfs, 2001; Grindley, 1995), and AM stereo (Shapiro and Varian, 1999). One reason a critical mass of complementary products did not emerge for the latter products was because firms were not able to agree on standards (Grindley, 1995; Shapiro and Varian, 1999; Rohlfs, 2001). ...
Purpose
The purpose of this paper is to analyze standard setting and how a critical mass of users emerged in an industry in which multiple interface standards co‐exist and a critical mass of users was created multiple times.
Design/methodology/approach
This paper is based on research conducted for almost ten years using the case study approach. Data were gathered through more than 100 interviews with Japanese firms and through analyses of published sources.
Findings
The paper finds that growth in mobile internet services required agreements on multiple interface standards where some of these interface standards exhibited interdependencies and thus required integral design, while others have been built on top of these “basic” interface standards. Agreements on the former interface standards enable basic data connections between phones, services, and content and this required integral design. The latter interface standards connect the mobile phone with content and applications from other industries (e.g. music, video, publishing, broadcasting, and payment) and each critical mass of phones, services, and content for them partly builds from previously created critical masses.
Research limitations/implications
The research focused on a single industry in a single country.
Practical implications
This paper helps scholars and practitioners better understand how interface standards and critical masses for them emerge.
Originality/value
This is the first paper to analyze multiple interface standards in a single industry and the emergence of a critical mass of users or complementary products for these standards.
... It is widely recognized that a critical mass (Rohlfs, 1974Rohlfs, , 2001 Reinganum, 1981; Cabral, 1990; Shapiro and Varian, 1999) of users or complementary products must be established in order for growth to continue in industries that display strong initial direct or indirect network effects (Katz and Shapiro, 1985; Arthur, 1994; Katz and Shapiro, 1994; Ryan and Tucker, 2006). In industries that display strong initial direct network effects, a critical mass of users is needed for users to receive sufficient value from the use of products such as the telephone, fax machine, or social networking services (Rohlfs, 1974Rohlfs, , 2001 Shapiro and Varian, 1999). ...
... It is widely recognized that a critical mass (Rohlfs, 1974Rohlfs, , 2001 Reinganum, 1981; Cabral, 1990; Shapiro and Varian, 1999) of users or complementary products must be established in order for growth to continue in industries that display strong initial direct or indirect network effects (Katz and Shapiro, 1985; Arthur, 1994; Katz and Shapiro, 1994; Ryan and Tucker, 2006). In industries that display strong initial direct network effects, a critical mass of users is needed for users to receive sufficient value from the use of products such as the telephone, fax machine, or social networking services (Rohlfs, 1974Rohlfs, , 2001 Shapiro and Varian, 1999). In industries that display strong indirect network effects, a critical mass of complementary products (e.g., hardware and software) are needed for users to receive sufficient value from the use of computers, video games, or video or music players (Grindley, 1995; Gandal et al, 2000; Dranove and Gandal, 2003; Ohashi, 2003; Nair et al, 2004; Clements and Ohashi, 2005). ...
... Finding agreement on these standards is highly problematic particularly in so-called multi-sided markets where the products or services from multiple types of firms interact with a single module or so-called platform through multiple interfaces (Evans, Hagiu, Schmalensee, 2008). Research has found that problems in standard setting are one reason why a critical mass of complementary products has not emerged in many industries/products such as digital audio tape, digital compact cassette, mini-discs, high-definition television, (Rohlfs, 2001; Grindley, 1995), and AM stereo (Shapiro and Varian, 1999). One limitation of this literature is its focus on industries/products that only require the establishment of a single interface standard or a few interface standards for a single platform and thus that only require a critical mass of users or complementary products to be created once for this single interface standard or platform. ...
This is one of the few papers to analyze multiple interface standards in a single industry and it finds that standard setting in such an industry is much more complex than those covered in the existing literature. In the mobile Internet, some of the interface standards initially required so-called integral design while others have been built on top of these “basic” interface standards. The former interface standards enable basic data connections between phones, services, and content while the latter ones connect the mobile phone with content and applications from other industries such as music, video, publishing, broadcasting, and payment. This paper shows that in connecting the mobile phone and other industries, each critical mass of phones, services, and content partly builds from previously created critical masses.Highlights► Some industries include multiple interfaces and thus multiple interface standards. ► Many interface standards require a critical mass of users or complementary products for growth to occur. ► Critical masses partly build from previously created critical masses in the mobile phone industry.
... Dr Moreover, this research combined two new motivational variables, namely the bandwagon effect and healthology (Bical & Ispir, 2021). The positive results attained by individuals when they pursue the lead of their friends on social media are sometimes referred to as the "bandwagon effect" (Tsai, et al., 2022;Rohlfs, 2003). According to Dehghani (2018), the term "healthology" was proposed to describe the convergence of health problems, technology, and informatics in SWDs that aims to deliver creative methods to satisfying the healthcare requirements of individuals. ...
... The term "bandwagon effect" is commonly used to describe the positive outcomes experienced by individuals when they follow the lead of their peers (Rohlfs, 2003). Tsai et al. (2022), in contrast to most previous studies Hsu (2016), Zhou et al. (2015), and Gao & Bai (2014), demonstrated that the bandwagon effect is not substantial, implying that consumers' sustained use of SWDs is unaffected by others. ...
Smart wearable devices (SWDs) are considered the next technological development after smartphones. Due to the COVID-19 epidemic, telework has increased, and people's attention to self-health monitoring has grown, which has boosted the SWDs market‘s growth. Moreover, gamification has been a prominent topic owing to its motivational and engaging impacts, leading to more regular physical activity, better health, and greater fitness levels among users. Even though SWDs could monitor fitness and health metrics, many users abandon them within a few months. Therefore, this research is among the first to examine the post-adoption behaviours of recent users to improve their engagement with SWDs to improve their health and wellness through the continued use and exercise. Through an online questionnaire 234 eligible responses were obtained from smartwatch users. PLS-SEM method was performed to examine the validity and reliability of the modelling framework. and testing the research hypotheses. The results revealed that utilitarian and hedonic motivations positively affect consumer engagement except for social interactions and perceived ease of use. In contrast, achievement showed a negative impact on customer engagement (CE).
Furthermore, results showed that the bandwagon effect has a significant impact on CE. However, healthology has shown to be insignificant in engaging customers with the smartwatch. Generally, results disclosed that gamification motivations boost customer engagement (CE) to change their behavior for the continued use and exercise to improve their health and wellness. Moreover, this research provides practical implications for the applications of wearables for wellbeing.
Keywords
Gamification, customer engagement, hedonic/utilitarian motivations, continued use, smartwatch, healthology, bandwagon effect.
... Differences are formalised in technology standards that define compatibilities between designs. As a new technology is altered to the point of incompatibility with the originator technology, this brings to an end the design replication process that keeps a technological or other species from extinction (Rohlfs, 2001 ). (2) Technologies are subject to selection forces in different niches or markets, which operate as forces differentiating between technologies as they evolve. ...
... Both biological and technological systems are based on interaction, and consequently incompatibilities can operate to eliminate an idiosyncratic competitor. As a new technology is altered to the point of incompatibility with the originator technology, this brings to an end the design replication process that keeps a technology species extant (Rohlfs, 2001). Acorn's technology had been incompatible with what had become the dominant standard in Acorn's product market, the IBM PC and Microsoft's operating system. ...
Can the concept of speciation explain evidence on how technologies branch and advance? Can evidence on innovation through spin-off usefully inform the concept of speciation? These questions are addressed through a case study of detailed processes enabling the shift of technology to new domains of application. An innovative IT firm developed its own semiconductor technology to remedy supplier deficiencies but it required a joint venture with a completely new business model to adapt and move the technology into new market domains. We propose the concept of techno-organizational speciation to delineate this phenomenon. Competing perspectives on speciation (compatibility, niche and lineage approaches) are found to illuminate the evidence, while complementarities between these conceptual dimensions are revealed by the case. Causal processes uncovered include the following: (1) Techno-organizational speciation through spin-off may be needed to launch a dominant technical standard, compatible with multiple applications. (2) This can be achieved through niche creation from which develops a new business ecosystem. (3) Inherited knowledge together with organizationally based learning foster the branching and renewal of technological lineages.
... The data retrieved for the 28 industries are: number of enterprises (in units), output value (in 100 million yuan), R&D projects (in units), full-time equivalent of m According to Amir and Lazzati [2011], the presence of more enterprises in an industry always enhances industrial viability, by lowering the critical mass needed to avoid the trivial equilibrium and improves exogenous technological progress. Supporting this, Rohlfs [2003] explained that the interconnection between suppliers of network goods is a critical feature that is at the heart of past successful new industry success, hence it is in connection with technological improvement. R&D personnel (man-year), expenditure on R&D (in 100 million), expenditure on new product development (10 000 yuan), sales revenue of new product (10 000 yuan), exports (10 000 yuan), patent applications (piece), invention patents (foreign patent license), invention patent-owned (domestic patent) and number of employees (¯rm-size). ...
This study investigates the factors influencing the Chinese manufacturing industry’s innovation and industrial performance utilizing a panel data approach on a sample of Chinese manufacturing enterprises over the period of 2008–2013. The industries were grouped according to related sectors into five groups, a general group was also created which included the whole data sample. The study found that research and development (R&D) expenditure positively influenced the growth of product innovation and industrial performance, but not necessarily knowledge innovation and export performance. Also, expenditure on new product development had a positive impact on both innovation and industrial performance. The growth of patent application was discovered to be influenced by an R&D project and foreign patent license. Finally, the number of enterprises and firm size (i.e. number of employees) contributed positively to the industrial output performance. The findings suggest that industrial R&D and new product development influences the success of product innovation and sales performance. The study recommends that the government should set up policies that will stimulate industrial R&D, while supporting technology transfers from foreign partners. Most importantly, government policies on the development of the industry should be addressed on a sectorial level and not a “one-size-fit-all” type of policy.
... Finally, Goldenberg et al. (2010) study the effect of network externalities in market growth. They argue that despite the conventional wisdom which suggests that network externalities should derive faster market growth due to bandwagon effect (Economides and Himmelberg (1995); Rohlfs (2003); Varian and Shapiro (1999); Doganoglu and Grzybowski (2007)), there is a chilling effect due to the "wait-and-see" behavior of consumers. Therefore, the growth of network goods has a slow initial phase followed by a fast growth stage. ...
We study the optimal pricing policy of a strategic monopolist selling durable goods in a dynamic pricing game with multiple rounds. Customers are forward-looking and experience a (positive) network externality, i.e., each customer's utility depends not only on her valuation of the item and the offered price, but also the weighted sum of the number of other customers who have purchased the item. The monopolist announces and commits to a price sequence and strategic buyers decide on when (if ever) to buy the good in a perfect Bayesian equilibrium. We fully characterize the optimal pricing policy and show that it is linearly increasing in time, where the slope of the price path is described by a single network measure: sum of the entries of the inverse of network externality matrix, termed network effects. Our result shows that increasing the number of rounds and network effects increases both revenue and social welfare. We also study the effect of price discrimination and establish that in the earlier rounds the price offered to more central buyers is lower. This is to encourage them to buy earlier which in turn increases the externality of other buyers and incentivize them to buy in subsequent rounds.
... However, in general, the network effects impact growth through their influence on technology adoption and diffusion. Nonetheless, the bandwagon effect, which results from the network expansion, is expected to drive output growth (Economides and Himmelberg, 1995; Rohlfs, 2001; Shapiro and Varian, 1999). Other studies have shown that the presence of network effects can have a chilling effect on growth for a number of reasons. ...
This study employs dynamic ordinary least squares and panel co-integration to estimate advanced countries’ R&D spillover effects on labour productivity in 28 Sub-Saharan African countries over the period 1992–2011. Results show that African countries that import and receive (technical and non-technical) development aid from advanced countries experience an increase in labour productivity, suggesting that trade and aid are transmitters of foreign R&D. However, the extent to which labour productivity responds to R&D spillovers varies based on the country of origin, where spillovers from the USA have a greater impact compared to those from other advanced countries.
... A clear understanding of one's business ecosystem may allow an organization to move quicker and more fluidly than their competitors and also leverage resources from other technospecies and inhabitants that may be currently unrecognized. Additionally , understanding inter-ecosystem technology flows has implications for technological standards (Rohlfs, 2001; Laakso & Nyman, 2014 ), industry consolidation (Puranam et al., 2006; Carbone, 2011) and the emergence of new technologies (Weiss et al., 2013 ). Given that the number of different entities in a business ecosystem is quite diverse, ranging from competitors to open source contributors, being able to identify and utilize these valuable resources would benefit both the focal firm and the health of the entire ecosystem. ...
... La red afecta la difusión, no solamente a través de las comunicaciones boca a boca, sino a través de las externalidades de red. Las externalidades de red tienen lugar cuando la utilidad que obtiene un individuo al adoptar una innovación cambia en función de la cantidad de individuos que previamente adoptaron la innovación (Katz & Shapiro, 1986; Rohlfs, 2001); las externalidades pueden ser globales, cuando el consumidor toma en cuenta el sistema social completo al evaluar la utilidad del producto en términos del número de adoptadores, o locales, cuando la utilidad el producto sólo considera la adopción en la red social más cercana (Katz & Shapiro, 1992). La tipología de la red social resulta crucial para el análisis de la difusión de innovaciones. ...
Este artículo analiza el impacto de la regla de decisión que representa el comportamiento de los individuos en la curva de difusión pronosticada por los modelos de difusión de innovaciones a nivel individual. Para ello, se hace uso de un modelo basado en agentes, en el cual la difusión ocurre dentro de una red tipo mundo pequeño, y se analiza el fenómeno usando 4 reglas de decisión diferentes: (1) una regla de umbrales con externalidades positivas, (2) una regla de umbrales con externalidades positivas y negativas, (3) una regla basada en el modelo de Bass y (4) una regla basada en la Teoría del Comportamiento Planeado. Los resultados obtenidos rechazan la hipótesis de igualdad entre las diferentes curvas de difusión. Se concluye que la regla de decisión tiene un impacto significativo en la curva de difusión pronosticada por los modelos de difusión a nivel individual.
... Several agent-based models of new product di®usion have taken into consideration network externalities, i.e. they assume that the utility of the investigated new products increases with the number of adopters [Rohlfs (2001)]; fax machines may serve as an example. In these cases, the successful di®usion of a new product depends on achieving a critical mass of customers using the product [ Guseo and Guidolin (2010)]. ...
Market introduction and diffusion of new products is complex and multifaceted since it involves spatially dispersed customers with individual preferences who may be exposed to a wide range of influences including word-of-mouth communication within a social network. During the past decade agent-based modeling approaches for simulating this process have become increasingly popular, because they not only capture the customers' behavior more realistically, but also allow for new insights for innovation management. The aim of this work is to provide an overview of recent developments, to discuss challenges, and to highlight promising directions for future research. [ABSTRACT FROM AUTHOR]
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... From a dynamic perspective, clustering is associated with smooth diffusion of a new network product or service at the initial stage. In general, the diffusion of network products or services is quite difficult to initiate, and they often end up being under-adopted (Rohlfs, 1974Rohlfs, , 2001). This is primarily because the value of a network product or service increases as more and more customers adopt interoperable products or services, and because the value for early adopters is minimal when there are only a few adopters. ...
The literature on network effects has implicitly assumed that an increase in the size of the installed base magnifies network effects, which is a source of incumbency advantage. We argue that the overemphasis on this relationship has resulted in controversy and confusion in the literature, where the role of social networks remains largely unaddressed. By developing computational models of network effects with various network structures, we show that social distance in a customer network plays a moderating role that strengthens or weakens the relationship between the installed base and network effects, which in turn, affects the durability of incumbency advantage. When the average social distance between members in a customer network is large, the incumbency advantage will not be amplified, and an entrant with an incompatible product or service may find ways into the market. On the other hand, when the average social distance is small, early entry with a growing installed base will magnify incumbency advantage.
... However, in general, the network effects impact growth through their influence on technology adoption and diffusion. Nonetheless, the bandwagon effect, which results from the network expansion, is expected to drive output growth (Economides and Himmelberg, 1995; Rohlfs, 2001; Shapiro and Varian, 1999). Other studies have shown that the presence of network effects can have a chilling effect on growth for a number of reasons. ...
This study analyzes the relationship between information and communication technologies (ICTs) and labor productivity growth in sub-Saharan Africa over the period 1975–2010. The results show that fixed-line and mobile telecommunications have a positive and significant impact on growth after penetration rates reach a certain critical mass. The thresholds are identified using nonparametric methods. Penetrations rates of between 20% and 30% for telephones and 5% for internet usage trigger increasing returns. FDI and openness are found to improve productivity and to help ICTs boost growth. Financial development serves as a possible transmission channel for the growth-enhancing effects of ICTs.
... The authors discuss three types of social influences: word-of-mouth communications, network externalities and social signals. Increase in the adoption of novel products can be due to consumers perceiving increased utility of a novel product or service because of adoption by more consumers (network externalities) ( Peres et al., 2010;Rohlfs, 2001) and transmission of social information that individual consumers surmise from adoption of innovation by others belonging to the same group or other groups (social signals) ( Peres et al., 2010;Van den Bulte and Joshi, 2007). Religiosity and ethnicity, the two main drivers of this research, help identify consumers as belonging to a particular group. ...
Purpose
– The purpose of this paper is to establish and test the role of religiosity, ethnicity, individual basic values, and consumer innovativeness in influencing consumer acceptance of novel products. This paper specifically addresses: the driving force of religiosity and ethnicity and mediating roles of individual basic values and consumer innovativeness in influencing acceptance of novel products.
Design/methodology/approach
– A questionnaire was constructed and distributed to 700 respondents in the urban area of Malaysia based on convenience sampling. The data collected data were analyzed using structural equation modeling.
Findings
– Findings show that religiosity and ethnicity are the main drivers that influence the acceptance of new products. Specifically, religiosity and ethnicity have negative relationship with openness to change (stimulation, self-direction, and hedonism) and positive relationship with conservation value (traditions and conformity); conservation values have negative effects on consumer innovativeness and acceptance of new products; openness to change values show the positive relationship with innovativeness and acceptance of new products; openness to change and conservation value mediate the relationship between religiosity and consumer innovativeness; conservation value mediates the relationship between ethnicity and consumer innovativeness; and consumer innovativeness mediates the relationship between individual basic values and acceptance of novel products. The model has been able to explain 34 percent of the variance in acceptance of novel products.
Originality/value
– Different from previous research that often focussed on demographic and observable (e.g. age, race, religion) antecedents of innovation acceptance, the current research emphasized on the influence of behavioral and psychological characteristics (e.g. religiosity, ethnicity, values and innovativeness) on the consumer acceptance of novel products.
... Adoption dynamics of such network products or services are quite understood from those of the traditional ones. Network products and services are quite difficult to get started and often end up being under-adopted (Rohlfs, 1978Rohlfs, , 2001). Network effects play a key role in the adoption of certain types of products, especially interactive communication-type innovations such as telecommunication services (Mahler and Rogers, 1999). ...
This study estimates the importance of network effects and the impact of a consumer's social network on her choice of mobile phone provider. The study uses network data obtained from surveys of students in four different classes in the Kurdistan University and Azad University of Sanandaj, Iran. We use the quadratic assignment procedure (QAP), a non-parametric arrangement test to adjust the particular error structure of network data. The sample size was 2058 and out of which 1340 respondent strongly coordinates their choice of mobile phone providers, if only their provider induces network effects. This suggests that this coordination depends on network effects rather than on information contagion or pressure to conform to the social environment.
... Several agent-based models of new product di®usion have taken into consideration network externalities, i.e. they assume that the utility of the investigated new products increases with the number of adopters [Rohlfs (2001)]; fax machines may serve as an example. In these cases, the successful di®usion of a new product depends on achieving a critical mass of customers using the product [Guseo and Guidolin (2010)]. ...
Market introduction and diffusion of new products is complex and multifaceted since it involves spatially dispersed customers with individual preferences who may be exposed to a wide range of influences including word-of-mouth communication within a social network. During the past decade agent-based modeling approaches for simulating this process have become increasingly popular, because they not only capture the customers' behavior more realistically, but also allow for new insights for innovation management. The aim of this work is to provide an overview of recent developments, to discuss challenges, and to highlight promising directions for future research.
... It may be, given the gushing sentiment expressed by participants over Google, that searchers develop an emotional bond with the search engine, making it affectively difficult to for the searcher to switch to another engine. Especially with Google, there is also the bandwagon effect [45] . Google has become the generic term for web search. ...
In this work, we investigate consumer reaction to web search engine logos. Our research is motivated by a small number of search engines dominating a market in which there are little switching costs. The major research goal is to investigate the effect that brand logos have on search engine brand knowledge, which includes brand image and brand awareness. To investigate this goal, we employ a survey of 207 participants and use a mixed method approach of sentiment analysis and mutual information statistic to investigate our research questions. Our findings reveal that some search engines have logos that do not communicate a clear meaning, resulting in a confused brand message. Brand image varies among the top search engines, with consumers possessing generally extremely positive or negative brand opinions. Google elicited a string of positive comments from the participants, to the point of several uses of the term ‘love.’ This is in line with the ultimate brand equity that Google has achieved (i.e., the generic term for web search). Most of the other search engines, including Microsoft, had primarily negative terms associated with them, although AOL, Ask, and Yahoo! had a mix of both positive and negative comments. Implications are that the brand logo may be an important interplay component with the technology for both established search engines and those entering the market.
... In this perspective, the importance for a firm operating in a market characterized by network externalities of getting the correct " rights management " strategy for the products it offers equates to the need of being sufficiently " open " to the external world, i.e., consumers and/or other firms, and not too greedy for (short-run) profits. Accordingly, the traditional literature on network externalities prescribes that a firm should be able to leverage network externalities and affirm itself on the market (Grindley 1995; Shapiro and Varian 1998, chapter 3; Rohlfs 2001). In the same vein, the launch of a sufficiently " open " format (i.e., a product compatible with other not-controlled complementary products) is reputed an important firm's strategy in these markets in order to reassure prospective buyers that they will not be locked-in in the future (Katz and Shapiro 1994). ...
This paper proposes a formal model that analyzes the degree of openness chosen by start-ups when entering the software industry. In line with the literature, we label as degree of openness the extent to which software start-ups mix open source (OS) and proprietary solutions in the portfolio of software products they offer. We relate the choice of the degree of openness to two key characteristics of the market segments in which software start-ups operate: the strength of the network externalities and the competitive advantage of the incumbent. Specifically, by modelling (price) competition between an incumbent and an entrant in two ways, i.e., the entrant is price-setter or price-taker, we derive the necessary condition(s) in terms of the strength of network externalities for observing the adoption of a business model that comprises the offering of both proprietary and OS solutions by the entrant (i.e., hybrid business model). Then, we highlight that, if a hybrid business model is the choice, the degree of openness chosen in equilibrium increases along with both the strength of the network externalities and the competitive advantage of the incumbent. This result holds indifferently whether the software start-up is modelled as a price-setter or a price-taker. An empirical test run on a sample of European start-ups in the software industry supports these theoretical predictions.
... A major justification of universal service comes from positive network externalities it provides (Riordan, 2001). Both indirect network externalities and direct external effects such as benefits of sharing digital products increase social welfare to some extent (Rohlfs, 2003). A larger network increases social welfare both from supplier and consumer side in the beginning. ...
... A second set of questions revolves around the interaction between the availability of 3D programs and the diffusion of 3D televisions. A large body of research suggests that a critical mass of users, content, and hardware must be created for growth to occur in those industries in which strong network effects exist555657. Will the availability of 3D movies for theater viewing reduce the challenges of creating a critical mass by making a sufficient number of movies available before 3D televisions begin to diffuse? ...
This paper analyzes the timing of a new technology's economic feasibility using a simple yet novel approach. While the conventional wisdom that costs fall as cumulative production increases does not enable us to analyze this timing, the proposed approach enables us to do so using existing technological trends in the components that form a new technology's system. For 3D television, although the concepts that form the basis of 3D television have been known for many years, improvements in specific components within two-dimensional (2D) televisions such as the liquid crystal display (LCD) are finally making 3D television economically feasible. More specifically, improvements in the frame-rates of 2D LCDs are making it economically feasible to introduce time sequential 3D, which requires special glasses. Similarly, increases in the number of pixels per area (resolution) will probably make auto-stereoscopic 3D LCDs economically feasible in the next five to ten years and thus eliminate the need for special glasses.
... Saloner (1989) attributes the failure to unify on a single standard of UNIX in the 1980s to proprietary interests in pursuing strategies that raise switching costs to work station users. Besen and Johnson (1986) and Rohlfs (2001) also relate a number of stories of delayed or failed adoption. For example, Besen and Johnson report that AM stereo required broadcasters and radio owners to be on the same standard, and broadcasts were delayed by the presence of multiple standards. ...
56K modems were introduced under two competing incompatible standards. We show the importance of competition between Internet Service Providers in the adoption process. We show that ISP's were less likely to adopt the technology that more competitors adopted. This result is particularly striking given that industry participants expected coordination on one standard or the other. We speculate about the role of ISP differentiation in preventing the market from achieving standardization until a government organization intervened.
... Organizations (suppliers and users) often recognize that preferred solutions to such coordination problems exist but none, acting on their own, can sufficiently coordinate activity to attain a mutually preferred solution and in striving for the solution, each organization wants to participate only if other organizations participate. On the one hand, without mechanisms that enable the coordination of dispersed organizations, a market can ''stall'' (Rohlfs, 2003). On the other hand, when coordination is achieved, the market ''takes-off'' as products become more valuable owing to a larger installed base and availability of complementary goods (Rohlfs, 1974; Katz and Shapiro, 1985). ...
How organizations attempt to coordinate with one another in markets increasingly marked by network externalities is an emerging topic of interest for researchers working in the traditions of innovation studies and new product development. New network externality products often face complex “chicken-and-egg” coordination problems, since the user base and complementary goods that add to product value are not yet established. In this paper we highlight three mechanisms of spontaneous coordination among large numbers of organizations: focal points, leadership and common knowledge. We catalogue these three mechanisms at work using data from the RFID (radio frequency identification) industry.
... Internet that led to industry formation was between entertainment contents and young people. The early success of NTT DoCoMo's i-mode entertainment contents led to positive feedback between content providers, users, and phone manufacturers (Funk, 2001Funk, , 2004), which can be interpreted as both a bandwagon (Rohlfs, 2001) and agglomeration (Marshall, 1920) effect. KDDI and Vodafone began to become part of this phenomenon in early 2000. ...
This paper describes the key technological trajectories and their potential effect on the expansion of mobile Internet applications. The initial success of entertainment content in Japan in 1999 caused manufacturers to introduce phones with color displays, polyphonic tones, cameras, and Java programs, and these functions are supported by other technological improvements like faster microprocessors, larger memory, and faster network speeds. Coupled with an evolution in user behavior, these technologies are making the phone a portable entertainment player, a new marketing tool for retailers and manufacturers, a multi-channel shopping device, a navigation tool, a new type of ticket and money, and a new mobile intranet device. These trends will have a large impact on competition in the global mobile phone market as dominant designs emerge at the global level.
... This relationship confirms the mobile status symbol role, although technology proves to be important in the first purchase. In fact, the Veblen and the bandwagon effects shift the focus from cost minimisation to status symbol (Rohlfs, 2001). Product quality is no longer the only and exclusive buying motivation. ...
Purpose
The main research question of the paper is to determine whether technology nowadays is overcome by customer preferences and needs. In particular, the role of the brand is to be analysed with respect to its influence in shifting customer preferences from the technical performances (tangible elements) to the emotional/symbolic ones (intangible elements).
Design/methodology/approach
Consumer behaviour was analysed by interviewing a random (but well stratified) sample of mobile phone users in order to study their consumption style and the motivations underlying the buying process in order to understand, on the one hand, the variables that influence people in the usage of mobile phones and, on the other, those that influence firms in launching new products, both from a technological point of view and from a marketing one.
Findings
The findings show various dimensions that are relevant in consumer minds when considering decisions regarding technological products. Brand attitudes do relate positively to consumer intention to use (purchase) specific mobile phones over others.
Research limitations/implications
The study, though exploratory, has underlined the importance of brand and the dualism between marketing and technology in the adoption and diffusion of technological products. Certainly, the analysis has some limitations, but it provides an initial perspective into understanding brand issues. Future research should focus on the effects of the cooperation between mobile operators and mobile manufacturers.
Originality/value
This paper provides an analysis of the brand attitude and perception tested and viewed through user eyes.
... Inertia arises because later adopters choose a firm with a larger installed base even though there are better options. This literature has also referred to inertia as bandwagon effects, and this concept assumes that users tend to do the same thing as others (Liebenstein, 1950;Rohlfs, 2001). It means that consumers are conformists because they have a "desire to join the crowd" (Grajek, 2010). ...
This article extends previous research on network industries by analyzing the role that firm strategy plays in markets where network effects are important. The authors postulate that firms can benefit from the existence of network effects through their strategic choices. The main premise of this article is that companies, by influencing expectations, coordination, and compatibility, can leverage network effects and network value. The authors empirically test their hypotheses in the mobile telecommunications industry, a paradigmatic example of a network industry. This study not only seeks to understand the impact of firm strategy on network value but also analyzes the impact of the latter on firm performance.
This paper revisits the total bandwagon property (TBP) introduced by Kandori and Rob (Games Econ Behav 22:30–60, 1998). With this property, we characterize the class of two-player symmetric \(n\times n\) games, showing that a game has TBP if and only if the game has \(2^{n}-1\) symmetric Nash equilibria. We extend this result to bimatrix games by generalizing TBP. This sheds light on the (wrong) conjecture of Quint and Shubik (Int J Game Theory 26:353–359, 1997) that any nondegenerate \(n\times n\) bimatrix game has at most \(2^{n}-1\) Nash equilibria. We also provide an equilibrium selection criterion to two subclasses of games with TBP.
Network effects arise where current users of a good gain when additional users adopt it (classic examples are telephones and faxes). The effects create multiple equilibria and fierce competition between incompatible networks; users’ expectations are crucial in determining which network succeeds. Early choices, such as the QWERTY typewriter keyboard, lock in the market; new entry, especially against established networks with proprietary technology, is often nearly impossible. Incompatible networks can induce efficient ‘competition for the market’, but more often create biases and inefficiencies. Policymakers should scrutinize markets where firms deliberately choose incompatibility.
The value of standardization leads to the persistence of established technical practices despite, in some cases, imperfect adaptation to current exogenous conditions. Economic explanation of these practices therefore requires reference to history. The conditions leading to path dependence in technical standards, as well as path independence, are examined with reference both to economic theory and to case studies of the QWERTY keyboard, videocassette recorder systems, railway track gauge and other railway standards. The controversy over path dependence is discussed.
The fundamental unit of activity of the brain is the neuron. It ingests nutrients, receives chemical signals from other neurons, and fires (produces electro-chemical action potentials), which results in sending chemical signals (that is, neurotransmitters) to other neurons. Human brains are estimated to have as many as 100 billion neurons. A first task of neuroeconomics is to accumulate information about the behaviour of collections of neurons and how they interact to produce economic choices.
In the innovation literature, paradigm changes in supply have been elaborated during the last three decades, while interdependencies between technology competition and social norm changes on the demand-side have received less attention. This paper investigates the concept of the social norm to model green product diffusion. It offers a social perspective on the systemic phenomena of tipping point and lock-in effects in relation to green product diffusion; this is our first contribution. Social interaction effects of distinct technology adoption patterns are conceptualized as social norm competition. We apply the method of simulation based theory building, to test the system behavioral implications of the postulated nonlinear socio-technical norm effect. We show that this conception provides an endogenous explanation of tipping behavior in s-shaped diffusion m1odels. This complements pure probabilistic technology diffusion models that neglect both endogenous and social influences on adoption decisions. We perform simulations for two and three competing technologies, using the example of vehicle fleet penetration with alternative drivetrain technologies. We show that the critical mass and the transition pathway is path dependent. Our second contribution is the specification of the critical mass within distinct socio-technical norm regimes. We apply a mathematical analysis of the technological landscape potential to visualize the characteristics of the tipping point. The tipping point is explained by the built up of a critical mass of users that signal a new socio-technical norm fostering transition to irreversible substitution. The offered approach and perspective is intended to be useful for effective long term policy making and to enhance the intuition about feedback rich sustainability transitions.
Dynamics in communication and innovation environments, such as new online communication channels, new corporate innovation tools, and access to and availability of information via digital technologies world-wide, are catalysts for the expanding interest of communication as an underpinning success factor in innovation management. From a theoretical perspective, the literature, however, has not fully acknowledged management of innovation communication as a new management function in corporate communication and has fallen short of comprehensively explaining the How? of managing innovation communication as a strategic capability for effective idea generation to idea conversion in the open innovation economy. This chapter provides a new approach: Innovation communication as an integrative management capability from a strategic management perspective. After presenting a literature review on communicating innovations and corporate communication management, a new understanding of innovation communication as a dynamic capability from in corporate communication management research is provided. Second, the direct and indirect effects of innovation communication—as an integrative management capability—on company value are illustrated and propositions are set up to further develop theory. Finally, a conclusion provides implications and a brief outlook on future research directions.
In the innovation economy, communication of innovation can encompass all market-related activities in technology and innovation management on a strategic and operational level (Trommsdorff and Steinhoff 2007) to commercialize innovation successfully. This implies a need for management frameworks, for instance, regarding integrated marketing communication (e.g., Bruhn 2006, 2008, 2009) to communicate consistently and continually about innovations and innovationrelated issues. Moreover, innovation communication in corporate communication focuses on the presentation of innovations and the organization's innovative capability to establish long-term stakeholder relationships and constructs, such as corporate reputation, on the organizational level (e.g., Mast and Zerfaβ 2005; Mast et al. 2005; Zerfaβ and Möslein 2009). However, communication can also be examined from a social process perspective (e.g., Rogers 1995, 2003). The communicative perspective in innovation diffusion research concentrates on three different types of communication in social systems (Peres et al. 2010) and points out managerial implications, for instance, word-of-mouth communication may represent an effective marketing tool for enterprises to systematically facilitate an individual's decision-making processes to invest in innovation (Mazzarol 2011).
What makes employees adopt a particular innovation, practice, or idea? And what makes it more likely for adoption to spread wide in an organization? This paper presents an agent-based model that simulates interactions among employees to analyze the spread of bandwagons. Agents are subject to conformity and peer pressure as well as to a two-level organizational hierarchy. In the model, perceptions of the surrounding environment depend on individual cognitive attitudes (or ‘tolerance’ to bandwagons), the level of ambiguity attached to social relationships, and organization size. Findings show that the probability of widespread diffusion (i.e., bandwagon) is dependent more on organizational size, conformity, and interactions than ambiguity and individual attitudes.
John WilliamsThe FCC Office of Plans and Policy's Working Paper Series presents staff analysis and research in various states. These papers are intended to stimulate discussion and critical comment within the FCC, as well as outside the agency, on issues in telecommunications policy. Titles may include preliminary work and progress reports, as well as completed research. The analyses and conclusions in the Working Paper Series are those of the authors and do not necessarily reflect the views of other members of the Office of Plans and Policy, other Commission staff, or the Commission itself. Given the preliminary character of some titles, it is advisable to check with authors before quoting or referencing these Working Papers in other publications. This document is available on the FCC's World Wide Web site at
Purpose
– In the late 2000s, the Ultimate Fighting Championships (UFC) emerged to become the dominant mixed martial arts (MMA) organisation, bringing the sport to mainstream acceptance. The purpose of this paper is to draw on theories of co-evolution and positive feedbacks to provide insights into how the UFC has assumed this dominant position.
Design/methodology/approach
– A single historical case study is compiled drawing on data from a number of sources, including the UFC, US State Athletic Commissions, MMA web sites and prior UFC-related academic literature.
Findings
– A number of significant growth dynamics are identified, including interconnections between the increase in free-to-air events and the generation of new UFC fans and revenues; the increased financial rewards to successful fighters that allows them to improve the quality of their training and the improved quality of UFC content; and the accumulation of a critical mass of high-level fighters that increases the reputation of the UFC and the increased attraction of new fighters to the organisation.
Research limitations/implications
– Further in depth studies are necessary to substantiate and quantify the interconnections identified in this paper.
Practical implications
– The paper provides insights for other non-mainstream sports organisations that are attempting to grow their participation and viewership.
Originality/value
– The emergence of new sports and sports organisations such as the UFC with global appeal and significant commercial returns is infrequent. This study contributes to the need for understanding of how new sports enter the mainstream and the role that governing organisations such as the UFC play in achieving this transition.
The purpose of this paper is to analyze market design for standardization in a standards war. We use an agent-based market model with a technological competition among standards and conduct a simulation on lots of scenarios concerning standardization problems. In recent years a technological progress and a globalization have been intensifying competitions between standards in many markets. In the competitions firms tend to pursuit short-term profits acquisition and winners can get more profits than losers. Moreover a firm strains on its own standard in the competitions. As the result, many stakeholders suffer various types of inconvenience from the competitions based on a market mechanism. Therefore some problems about the standardization are noticed in many markets. However it is difficult for market designers to decide a timing or method for standardization. We would like to support them by using a useful technique in an agent-based social simulation (ABSS), which is called "scenario analysis." This paper simulates various scenarios by combining some situations and design policies. The analysis can show tendencies of market outcomes and the mechanisms of the behaviors under various situation scenarios.
Bandwagon effects, or network externalities, are one of the most important topics in modern economics. It seems that the negative aspects of bandwagon markets have been overemphasized, though a lot of bandwagon services have voluntarily taken off without special interventions by the government. The purpose of this paper is to show that bandwagon services do not always have the characteristics of market failures in interlinking. Two main points will be made in this paper: first, competition with two-way interlinking is the most socially desirable among various bandwagon-market structures for the most part; second, this socially desirable market structure is likely to be realized as a result of a voluntary interlinking arrangement.
The traditional paradigm of business schools is not well suited to handle the ambiguity and high rate of change facing many industries today. The typical MBA program is focused on analytic and cognitive skills, stylized treatment of real business problems, and self-centered careerism with a limited recognition that management is as much art as science. These new challenges that managers now face call for a shift in emphasis toward topics not well covered in academia, from the role of intuition to how to navigate uncertainty (in contrast to risk) or balance focal and peripheral vision. This article examines the teaching, research, and governance issues these new learning imperatives pose for business schools and offers some constructive suggestions for fixing them, based in part on the experience of Wharton's Mack Center for Technological Innovation.
The impacts of information technology (IT) on total factor productivity (TFP) are assessed through an integrative framework of IT-induced externalities and IT-leveraged innovations. Based on network externalities and endogenous growth theory, our study aims to reconcile the seeming discrepancy between the recent observed evidence and the prediction by neoclassical growth theory. We argue that computerization has reshaped the competitive landscape into a network economy with IT-induced externalities that benefit not only IT purchasers but also other stakeholders. Moreover, IT is a platform technology that can leverage innovations to enhance the technological level of production process. Consequently, these two factors of IT-induced externalities and IT-leveraged innovations exert positive impacts on TFP, suggesting IT plays a more pivotal role than input consumption and accumulation that neoclassical growth theory assumes for IT. We use panel data from 30 Organization of Economic Cooperation and Development (OECD) countries over the period of 2000–2009 to empirically test hypotheses on this IT-TFP link. Implications are drawn from our findings for future research to measure IT׳s contributions at the macro level more accurately, and policymakers are urged to cultivate IT׳s positive impacts on TFP to help sustain long-term economic growth.
This book chapter draws on the dynamic capability approach to specify the elements of the dynamic capability innovation communication necessary to maintain the management of communication processes, tools and activities regarding the communication of a corporation's or collaborative network's innovation portfolio in the innovation economy. Dynamic capabilities can facilitate enterprise performance in a continuously changing environment with rapid innovation and globally spread resources, capacities, and stakeholders. In this context, innovation communication enables systematically planned transactional information transmissions related to innovations, context-issues of innovations and innovative capability and addresses communication markets, resource markets and sales markets based on a chosen innovation communication strategy. As one of a corporation's dynamic capabilities, innovation communication may not only positively influence an innovation's diffusion or innovation reputation in environmental dynamics but may also re-shape different markets and collaborative networks as well as create and extend strategic assets to communicate innovations in a highly competitive innovation economy. After introducing a foundation of sustainable enterprise performance by dynamic capabilities in the innovation economy, this book chapter presents a conceptual definition and description of the elements of the cross-functional dynamic capability innovation communication including a classification system as a fundamental basis on which future research might build on, in particular to specify the dynamic capability innovation communication for empirical research studies. Based on the characteristics of innovation communication, strategies and strategic tools for organizations and collaborative networks are also provided to support decision-making in strategic corporate communication management.
We briefly survey the economics of network effects and switching costs (in 3,400 words). For comprehensive coverage of the same ground see Farrell and Klemperer's 60,000-word contemporaneous survey, available at www.paulklemperer.org.
We briefly survey the economics of network effects and switching costs (in 3,400 words). For comprehensive coverage of the same ground see Farrell and Klemperer's 60,000-word contemporaneous survey, available at www.paulklemperer.org.
In platform-component systems with indirect network effects, some ‘must-have’ components are so popular with consumers that they create large, discrete indirect network effects when they become available on a platform. For example, ESPN is a must-have component of cable TV platforms. This paper examines how platform market structures determine exclusive versus non-exclusive contracts between platforms and components. It shows that a component provider is more likely to sign exclusive contracts with a single platform if its popularity is high, the platform market share difference is large, and cross-platform indirect network effects are low.
How has innovative and competitive behavior in computing and internet markets evolved over the past half century? In the first section of this review, I discuss these questions in light of six topics: the limited role for technology push; the diffusion of general purpose technologies; the organization of proprietary platforms; the presence of asymmetric innovation incentives; the importance of market-oriented learning; and the localization of economic activity. Despite dramatic changes in outcomes, in the predominant product markets, and in the identities of leading sellers, the conditions of market structure shape innovative conduct in firms from one year to the next and, to a large extent, from one decade to the next, in many of the same economic terms. In the second section, I closely examine the U.S. commercial Internet experience in the 1990s. While the peculiar events that led to the invention of the commercial Internet explain some of the salient and unique features of the commercial experience, much innovative activity resembles conduct seen for many decades in computing markets. This analysis highlights three additional topics: the division of technical leadership; the rise of open organizational forms for coordinating platforms; and the extraordinary breadth of activity touched by the Internet. These three additional factors account for many of the novel aspects of innovative conduct in Internet market.
Purpose – The purpose of this paper is to identify several measures that reflect the diffusion of the mobile internet. Design/methodology/approach – The measurements are implemented with a newly developed handset-based mobile service research platform that provides a novel way to accurately identify trends taking place in mobile service usage. These measures are demonstrated in a case example comparing Finnish early-adopter smartphone users between 2005 and 2006 (500 and 695 users). Findings – The results indicate that the mobile internet has not yet emerged on a large scale in Finland. On the contrary operators have slightly increased their power, potentially because handset bundling with mobile subscriptions is now allowed in Finland. Research limitations/implications – The measurement framework can be further utilized in both cross-sectional and longitudinal study settings in evaluating the emergence of the mobile internet. No other empirical research method provides the accuracy and scope of usage measurements done with the handset-based research platform. However, the shortcomings of the new method should be realized. Practical implications – The paper suggests that the mobile internet has not emerged widely, even in early-adopter user segments. Originality/value – This paper contributes to the measurement of mobile internet service usage. Mobile internet services are currently emerging in early-adopter user segments. These services might shake the dynamics of the mobile services industry by introducing different kinds of technical innovation and business logic.
Purpose
The purpose of this paper is to analyse technological and regulatory issues arising from the introduction of TV services on mobile handsets.
Design/methodology/approach
The paper looks at the various technological solutions to the provision of mobile TV and records the progress to date of trials of these technologies. It also examines the regulatory framework in the EU and certain individual countries and analyses the effects of spectrum shortages.
Findings
The paper finds that the existence of competing, incompatible technologies, the constraints on the availability of suitable spectrum, the issue of what content to broadcast and the difficulties of persuading customers to pay for it are holding back the widespread dissemination of mobile TV, but only on a temporary basis.
Originality/value
This paper is the first detailed attempt to investigate this topic.
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