The impact of technology advancement strategies on consumers’ patronage decisions

Abstract

Among the many factors that encourage return patronage of incumbent technology, two that have received scholarly attention in other contexts are network externalities and switching costs. However, the roles of network externalities and switching costs in encouraging return patronage of technology have not yet been subjected to rigorous empirical testing. Furthermore, no examination has been conducted of the degree to which these factors play a role in the success or failure of corporate technology advancement strategies designed to encourage return patronage. In this context, we propose a systematic framework to explore the nature of the links between technology advancement strategies and consumer technology patronage via network externalities and switching costs. Based on consumer survey data from South Korea, we find empirical support for the link between technology advancement strategies and consumers’ technology patronage. Specifically, both network externalities and switching costs are found to be positively associated with technology patronage. According to this study, consumers value compatibility because it gives them access to a larger network. Further, compatibility strategy is associated with the costs involved in switching away from incumbent technology because of an abundant or varied supply of complementary goods. The results also show that preannouncement is a key marketing strategy to achieve favorable expectations and to retain the patronage of current technology users.