Technology Strategy and Competition Track: Thinking Strategically about Network Effects

Abstract

Many, highly valuable firms such as Alibaba, Alphabet, Amazon, Apple, Meta, and Tencent owe parts of their success to network effects. Therefore, it is unsurprising that scholars have been studying network effects and their implications for decades. However, we still know surprisingly little about (1) how to measure network effects, (2) the implications for firms trying to actively induce network effects, and (3) the competition under heterogeneous network effects. The goal of this symposium is to highlight research that deals with these issues. All four presenters illustrate novel ways to measure the strength of network effects and show how these network effects affect value creation and/or firm performance. Results show that network effects are by no means a panacea for firms as (1) they might be too weak to justify a costly merger, (2) they negatively affect firm performance when paired with incompatible strategies, (3) their strength critically depends on heterogeneous user characteristics, and (4) strong within-period network effects are not enough to achieve a dominant market position without consistently strong inter-period network effects. The four presentations will be followed by a discussion that aims to identify common themes and fruitful avenues for future research on network effects. Dog Eat Dog: Balancing Network Effects and Differentiation in a Digital Platform Merger Presenter: Chiara Farronato; Harvard Business School Network Effects by Choice: A Demand-Side Perspective on Adoption Performance for Board Games Presenter: Joe N. Ploog; UCL School of Management Online Communities on Competing Platforms: Evidence from Game Wikis Presenter: Tobias Kretschmer; LMU Munich How Users Drive Value in Two-sided Markets: Platform Designs That Matter Presenter: Marshall Van Alstyne; Boston U.