Adaptation on rugged landscapes
Management Science
Small worlds: the dynamics of networks between order and randomness
Small worlds: the dynamics of networks between order and randomness
RE-Thinking the Network Economy: The True Forces That Drive the Digital Marketplace
RE-Thinking the Network Economy: The True Forces That Drive the Digital Marketplace
Sync: The Emerging Science of Spontaneous Order
Sync: The Emerging Science of Spontaneous Order
Imitation of Complex Strategies
Management Science
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The literature on network effects has popularized a hypothesis that competition between incompatible technologies results in the “winner-take-all” outcome. For the survival of the firm in this sort of competition, the installed base has been emphasized. We argue that the validity of this hypothesis depends on how customers interact with one another (e.g., if they exchange advice or files). In some interaction networks, customers influenced by their acquaintances may adopt a lagging technology even when a lead technology has built a large installed base. The presence of such a local bias facilitates the persistence of incompatibilities. When local bias cannot be sustained in other interaction networks, one technology corners the market. Our study suggests that overemphasizing the installed base, while ignoring network structure, could mislead practitioners.