Role Of Network Externalities Research Articles

Exploring the antecedents of trust and users’ continuance intention in hybrid online travel platforms: the role of network externalities and platform quality

ABSTRACT Drawing from network externalities perspective in the Economics literature, this study investigates the antecedents of trust and users’ continuance intention in the context of hybrid online travel platforms (HOTPs). Data were obtained by surveying 489 users of HOTPs in China. The empirical results based on the PLS-SEM model showed that indirect and direct network externalities positively influence functional quality and hedonic quality respectively. Furthermore, both functional quality and hedonic quality of HOTPs positively affect users’ trust, which in turn positively affects users’ continuance intention and negatively affects perceived risks.

What influences users’ continuance intention of internet wealth management services? A perspective from network externalities and herding

In recent years, more and more wealth management platforms have adopted Internet wealth management (IWM) services to attract users. Due to the intensive competition and low switching costs, it is essential for platforms to enhance users’ willingness to continue using IWM services. Comprehensively considering the role of network externalities and herding, this study identified the factors affecting users’ continuous intention of IWM service. The research model was tested using survey data collected from 637 respondents concerning their perceptions of IWM services. The results indicate that network externalities (network size, perceived complementarity, network strength) have significant impact on herding and perceived value, thus affecting continuance intention. Furthermore, herding and perceived value have a greater impact on continuance intention of users with low financial literacy than that of users with high financial literacy. This study could benefit wealth management platforms and researchers seeking to improve the retention rates of IWM users.

Designing a referral reward program in freemium: The role of network externalities

We develop a model to explore firms’ decisions on designing referral reward programs in freemium. We find two indices that firms could compare against value discrepancy to choose their strategy. The optimal price and referral reward rate are obtained. We find that the absence of network externality relating to product quality makes referral dysfunctional, and we conduct sensitivity analysis. This study contributes to theories that incorporate a referral reward program into the freemium model and provides practitioners with viable takeaways.

Learning With Friends: A Theoretical Note On The Role of Network Externalities In Human Capital Models For The New Industry

Contemporary literature on how individuals learn in the 21st-century reveal critical differences from learning patterns in the mid-20th century–a period in which celebrated, pioneering works of Mincer, Becker and Ben-Porath on human capital were developed. Education and learning theories have evolved, but the prevailing human capital theories have not. Given continued technological progress, and the rise in available knowledge through the Internet, learning in networks is a distinct feature of the 21st-century industry. The connectivist theory of learning in the digital age is explored and substantiated. Using optimal control theory and dynamic optimisation, we define optimal conditions for knowledge generation and growth of learning networks. We find that knowledge per learner grows exponentially when the obsolescence rate of knowledge is less than the departure rate of learners from the learning network. We also find that a learning network will continue to grow as long as learners are sufficiently impatient and that technology sufficiently becoming obsolete faster. Furthermore, we show a positive relationship between the size of the network and wealth on knowledge. That is, as long as the remaining wealth on knowledge is increasing, the learning network will continue to grow over time. We present insights for policy consideration that address the necessary and sufficient conditions for sustained knowledge generation and the growth of the learning network.

On the role of network externalities in strategic delegation contracts with an industry-wide union

ABSTRACTThis article analyses the role of network externalities in managerial delegation contracts for differentiated products when the marginal product costs (the wage) are set by an industry-wide union. The results show that, in both Bertrand and Cournot equilibria, each owner offers a profit-oriented incentive scheme to his or her managers by penalizing sales maximization, irrespective of the strength of the network externalities. In the presence of weak network externalities and low product differentiation, firms can obtain higher profits in the equilibrium under Cournot-type quantity competition compared with that under Bertrand-type price competition. Furthermore, the wage chosen by the union is higher in the Cournot than in the Bertrand equilibrium. In the Cournot equilibrium, the wage increases with the strength of the network externalities. However, in the Bertrand equilibrium, there exists a threshold level of the degree of product differentiation.

The effects of post-adoption beliefs on continuance use of a microblogging service: the role of network externalities

Users of the Chinese microblogging service have fallen a lot from 308.6 million in 2012 to 280.8 million in 2013 after an explosive growth in 2010. This fact drives us to consider why people join and continue to use microblogging. This study combined network externalities and expectation-confirmation theory of IS continuance, collected and analysed data of 532 samples by structural equation modelling (SEM) approach. The findings show that satisfaction is the most influential factor in people's continued use of microblogging, followed by usefulness. The perceived complementarity and the number of peers have significant effect on perceived usefulness, but the number of members has no significant effect on perceived usefulness. The perceived complementarity, number of members, and number of peers have significant effects on expectation confirmation. The implication of research and discussions provides reference for microblogging operators in marketing and operation.

The effects of post-adoption beliefs on continuance use of a microblogging service: the role of network externalities

Users of the Chinese microblogging service have fallen a lot from 308.6 million in 2012 to 280.8 million in 2013 after an explosive growth in 2010. This fact drives us to consider why people join and continue to use microblogging. This study combined network externalities and expectation-confirmation theory of IS continuance, collected and analysed data of 532 samples by structural equation modelling (SEM) approach. The findings show that satisfaction is the most influential factor in people's continued use of microblogging, followed by usefulness. The perceived complementarity and the number of peers have significant effect on perceived usefulness, but the number of members has no significant effect on perceived usefulness. The perceived complementarity, number of members, and number of peers have significant effects on expectation confirmation. The implication of research and discussions provides reference for microblogging operators in marketing and operation.

Social virtual world continuance among teens: uncovering the moderating role of perceived aggregate network exposure

Engagement in virtual worlds has become pervasive, particularly among the young. At the same time, the number of virtual environments has increased rapidly. Due to intensifying competition, promoting sustained usage, i.e. continuance, has become a top priority for virtual world operators. Prior research has shown that network externalities play a key role in the adoption of communication technologies. However, a small amount of research has examined the role of network externalities in continued IT usage in general or with respect to the virtual world participation in particular. To fill in this gap, we examine how perceived network externalities affect the continuance of social virtual worlds. To this end, we introduce the concept of perceived aggregate network exposure (PANE). We extend the original information systems (IS) continuance model with perceived enjoyment and position PANE as a moderator. We test the model with data collected from 2134 Finnish Habbo Hotel users and employ structural equation modelling in the analysis. The results demonstrate that PANE moderates the influence of motivational factors on continued use intention and satisfaction.

Product Quality and New Product Performance: The Role of Network Externalities and Switching Costs*

Research about the critical drivers of new product success is perhaps one of the thorniest issues confronting academic research in the field. Among them, product quality is considered a crucial element to obtain a competitive advantage. However, empirical evidence suggests low returns on product quality investments in new products, and consequent manager claims for an explanation of whether quality investments are fruitful for the firm. Recently, a new research stream has suggested that the role of other complementary products (indirect network externalities) and the critical mass of adopters (direct network externalities) lead to higher market returns than quality itself. Moreover, researchers disagree about the perverse or positive effects that the switching costs associated with the product have on the short‐ and long‐term performance of the firm. In this paper, we propose that, as products and technologies become more interconnected, the associated network effects and switching costs will play an important role with regard to new product performance, both independently and in conjunction with its quality. We empirically test a model that relates product quality, network effects, and switching costs to short‐term/long‐term new product performance, using data collected from 255 innovative products. The data analysis indicates that network effects, and consumers' switching costs, can modify previous findings with regard to the isolated product quality consequences concerning new product performance. Overall, the results of this study may help firms manage the relationship between quality, network externalities, and switching costs more efficiently, both in the short term and in the long term.

Using Experiments in Teaching and Explaining the Role of Network Externalities in Technology Adoption and Industry Evolution

The experiment explained in this paper helps students to understand the importance of network externalities in the evolution of industries and technology. Complex enough to permit exploration of the role of strategic pricing in network industries, the method is still flexible enough to allow simpler non-strategic illustrations of the network effects. Given prominent examples of network effects in firm and government action (e.g., the advanced television systems committee, antitrust litigation for the credit/debit card industry, and private strategy in the game console and newer DVD technologies (HD DVD vs. Blu-Ray)), this experiment fits well as either an illustration of the idea and its potential importance or a starting point for a more detail studied of the issue.

Emergence and Evolution of ATM Networks in the UK, 1967-2000

Research in this article traces the origins of a process of competitive change in British retail financial markets by looking at the emergence of cash dispensers technology, how it transformed into Automated Teller Machines (ATM) and how proprietary ATM networks gave way to total interoperability of cash withdrawals through a single common switch. Cash dispensers were an industry specific innovation developed by British manufacturers (e.g. Chubb and De La Rue) who, in turn, were overtaken by U.S. (e.g. NCR) and German (e.g. Siemens-Wincor) manufacturers. However, as the ATM became a global technology some of the leading providers (i.e. Burroughs, IBM and NCR) kept manufacturing and even their main design facilities in Scotland. The evolution of this technology illustrates changing boundaries of the banking organisation, the challenges faced by financial intermediaries to adopt on line, real-time computing and highlights the role of network externalities in financial markets. From a business history perspective, the ATM, electronic funds transfer and other retail payment media have been largely neglected by British historians and management scholars. Yet the success of automated cash dispensers as a distribution channel in retail banking epitomises a shift in bank strategy, namely how applications of computer technology moved from being potential sources of competitive advantage to being a minimum requirement for effective competition in retail finance. This article thus promotes the idea that the history of technology must consider its users, their strategies and business models in as much as business histories of the late twentieth century will be incomplete without attention to developments in information and communications technologies.

Emergence and evolution of ATM networks in the UK, 1967–2000

Research in this article traces the origins of a process of competitive change in British retail financial markets by looking at the emergence of cash dispensers technology, how it transformed into automated teller machines (ATMs) and how proprietary ATM networks gave way to total interoperability of cash withdrawals through a single common switch. Cash dispensers were an industry-specific innovation developed by British manufacturers (e.g. Chubb and De La Rue) which were, in turn, overtaken by US (e.g. NCR) and German (e.g. Siemens-Wincor) manufacturers. However, as the ATM became a global technology some of the leading providers (i.e. Burroughs, IBM and NCR) kept manufacturing and even their main design facilities in Scotland. The evolution of this technology illustrates changing boundaries of the banking organisation, the challenges faced by financial intermediaries to adopt on-line, real-time computing and highlights the role of network externalities in financial markets. From a business history perspective, the ATM, electronic funds transfer and other retail payment media have largely been neglected by British historians and management scholars. Yet the success of automated cash dispensers as a distribution channel in retail banking epitomises a shift in bank strategy, namely how applications of computer technology moved from being potential sources of competitive advantage to being a minimum requirement for effective competition in retail finance. This article thus promotes the idea that the history of technology must consider its users, their strategies and business models inasmuch as business histories of the late twentieth century will be incomplete without attention to developments in information and communications technologies.

Obesity, social inequality and economic rationality: An overview

Abstract This paper reviews the economic literature related to obesity and consumer decisions, pursuing the overall question, whether the current obesity epidemic and its social bias can be viewed as a result of rational consumption behaviour. We address a number of potential explanations based on consumers’ utility maximisation behaviour, which all may contribute to explain the ongoing rise in obesity prevalence in many western countries. In addition to standard neoclassical explanations of obesity, we discuss moral hazard aspects, the role of network externalities, self-control problems and habitual behaviour. We include all of these aspects of the individual weight decision in a unified theoretical framework and present existing empirical evidence for each effect. Based on our analysis, we discuss the different economic explanations and give suggestions for future research.

Competition Among Virtual Communities and User Valuation: The Case of Investing-Related Communities

Virtual communities are a significant source of information for consumers and businesses. This research examines how users value virtual communities and how virtual communities differ in their value propositions. In particular, this research examines the nature of trade-offs between information quantity and quality, and explores the sources of positive and negative externalities in virtual communities. The analyses are based on more than 500,000 postings collected from three large virtual investing-related communities (VICs) for 14 different stocks over a period of four years. The findings suggest that the VICs engage in differentiated competition as they face trade-offs between information quantity and quality. This differentiation among VICs, in turn, attracts users with different characteristics. We find both positive and negative externalities at work in virtual communities. We propose and validate that the key factor that determines the direction of network externalities is posting quality. The contributions of the study include the extension of our understanding of the virtual community evaluation by users, the exposition of competition between virtual communities, the role of network externalities in virtual communities, and the development of an algorithmic methodology to evaluate the quality (noise or signal) of textual data. The insights from the study provide useful guidance for design and management of VICs.

Product Line Design in Markets with Network Externalities

The extant economic and marketing literature on product line design mainly addresses firm's product decisions in conventional markets. However, many products demonstrate salient network externalities in their consumption, such as computers, software, telephone, telefax, and Internet routers. To our best knowledge, the role of network externalities in product line design has not been addressed. This paper fills the gap by investigating how the optimal structure and prices of a product line depend on the network externalities in the product market. A fundamental insight we obtain is that, in markets with network effects, the firm has a greater incentive to extend the length (as measured by the number of product varieties) of its product line. In our vertical model, market segmentation is sub-optimal in the absence of network externality. With externality, the monopolist offers two distinct products demonstrating maximum differentiation. The low-end product is used primarily to expand the product network, and is offered below marginal cost when externalities are sufficiently strong.

The Role of Network Externalities in the U.S. VCR Market in 1978-86

This paper estimates the importance of network externalities in the U.S. VCR market between 1978-86. Estimation reveals the significant role of networks in the format competition between VHS and Beta. The paper also finds that if Sony, a major Beta supplier, had aggressively introduced its VCRs at the early stage of competition, Beta would have dominated the market in 1985, contrary to the fact that the format exited in 1989. Finally the paper measures consumer welfare for the value of network externalities in VCRs.

Venture Capitalists as Benevolents Vultures: The Role of Network Externalities in Financing Choice

This paper studies how externalities between projects affect investment decisions and investor involvement with the companies they invest in. Entrepreneurs select investors for their projects, choosing between venture capitalists and individual angel investors. In industries with high externalities, venture capitalists can increase social welfare by coordinating their investments into portfolio companies and by intensively monitoring their progress to an endogenously determined higher degree. However, entrepreneurs are indifferent to the total effect of venture capital investment and simply choose venture capital finance only if it increases their project's NPV. When the network externalities are positive, coordinated investment by VCs guarantees profitable investment into some projects that would otherwise have ex-ante negative NPV and fail to attract funding When the network externalities are negative, coordinated investment allows early termination of some projects. Some positive NPV projects may even be sacrificed, to the total benefit of overall value of the VC portfolio. The entrepreneurs know that there is a probability that it is their project that will be terminated, yet they are willing to allow for this eventuality because, if their project continues the payoff will be much higher, than with non-coordinated individual investment.

Monopoly, Quality, and Network Externalities

We describe the behaviour of a monopolist supplying a vertically di¤erentiated good with network externalities. Assuming a fixed cost of quality improvements we show that the presence of network externalities enhances the incentive to expand output associated with scale economies. Although the quality distortion operated by the monopolist increases with network externalities, the outputexpansion effect is dominant, so that the welfare loss due to monopoly power shrinks as the role of network externalities in determining consumers’ satisfaction becomes more relevant.

Network Effects and the Impact of Free Goods: An Analysis of the Web Server Market

:Theory suggests that the role of network externalities is critical to transforming new businesses from market entrant to market leadership positions. However, there have been relatively few empirical studies of network externalities in E-commerce contexts. Building on the theory of networks and technology standards, this paper develops and tests three propositions related to network effects and the provision of free goods in Web server markets. Hedonic pricing models estimated on the basis of comprehensive time-series data are used to examine the factors that determine price and to gauge the impact of network effects and free goods. The market for Windows Web servers reflects the influence of network externalities even after the entry of a viable free-market alternative. The UNIX market, dominated by open-source and other free software products through the course of this study, does not exhibit network effects. The research reported here advances the theoretical literature by testing new propositions in a new and unstudied context. Its empirical findings contribute to an understanding of the dynamics of the Web’s software market and, thus, of future competition in E-commerce markets.