Abstract
Network effects play a central role in industries such as software and electronics. So far, however, their role in shaping biotechnology innovation has largely been overlooked. Since network effects can make markets vulnerable to monopoly, it is important to know whether and to what extent they operate in biology. We address this issue by a multimethod study of academic and commercial stem cell research. We present statistics showing that researchers focus on a tiny fraction of available lines; that network effects provide the best explanation of this phenomenon; and that these effects are primarily driven by reduced user costs due to learning spillovers. We conclude with a model of network effects in biology research and development. Surprisingly, some winner-take-all outcomes are transient, so that antitrust intervention may not be necessary.
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