scholarly journals Borders of Network Effects and Early Internationalization as a Latecomer Strategy

2021 ◽  
Author(s):  
Sungyong Chang ◽  
Sanghyun Park
Keyword(s):  
Network Effects ◽  
Theoretical Work ◽  
Order Effect ◽  
Global Market ◽  
Global Strategy ◽  
Network Effect ◽  
Demand Side ◽  
Early Internationalization ◽  
Indirect Network Effects ◽  
Direct Network

Scholars have examined the persistent heterogeneity of firm performance from the entry-order effect perspective. In the international business literature, this perspective has been highlighted in research on early internationalization (i.e., the born global strategy). While prior work has focused on the heterogeneity of firm characteristics and capabilities, we present a demand-side view of early internationalization by focusing on network effects. Prior theoretical work on network effects has predicted that when network effects are prominent, survival is challenging for latecomers because of the installed bases of first movers in the global market. However, we see many cases, such as the mobile instant messenger (MIM) market, where no single winner dominates the global market and where many latecomers have survived by implementing early internationalization. We build upon Brian Arthur’s model of demand-side dynamics. The findings suggest that latecomers may overcome their disadvantages by pursuing early internationalization, especially when the direct network effects (i.e., social network effects) are stronger than the indirect network effects (i.e., installed base effects). The underlying rationale is that country borders often demarcate the reach of the direct network effect, limiting the power of installed bases.

scholarly journals Coordinating Demand and Supply for Crowd Logistics Platforms with Network Effect

2021 ◽  
Vol 2021 ◽  
pp. 1-14
Author(s):  
Wenjie Wang ◽  
Lei Xie
Keyword(s):  
Network Effects ◽  
Service Providers ◽  
Negative Impact ◽  
Positive Impact ◽  
Network Effect ◽  
Pricing Strategy ◽  
Pricing Strategies ◽  
Demand And Supply ◽  
Direct Network ◽  
Crowd Logistics

The crowd logistics platforms connect stochastic demand with uncertain delivery supply which is provided by independent service providers. Considering direct-network effects and cross-network effects between the demand and supply side, a dynamic surge pricing model for crowd logistics platforms is built. The pricing strategy is derived to coordinate the supply with demand to equilibrium. Furthermore, the pricing strategy minimizing cumulative delivery orders is analyzed. The numerical simulation results show that the dynamic surge pricing strategies can stimulate the uncertain delivery supply for maximizing platforms’ revenue. And, direct-network effects pose a positive impact on the dynamic surge pricing strategy. In contrast, the cross-network effects have a negative impact on the pricing strategy. However, direct-network effects and cross-network effects negatively influence platforms’ revenue.

scholarly journals Business diversification and multifaceted markets

2021 ◽  
Author(s):  
Koki Arai ◽  
Shuya Hayashi
Keyword(s):  
Real Estate ◽  
Network Effects ◽  
Financial Data ◽  
Network Effect ◽  
Multiple Perspectives ◽  
Difference In Differences ◽  
The Real Estate ◽  
Indirect Network Effects ◽  
The Difference ◽  
Railroad Company

AbstractIn this paper, we examine multiple segments, conventionally analyzed from the perspective of business diversification, from multiple perspectives in a multifaceted market. Specifically, based on segmental financial data, we conduct an empirical analysis of whether increased sales in the transportation business increase the profit margin of the real estate business of a railroad company. The results show that there are two types of sidedness among many businesses. The effects of both positive and negative indirect network effects were found to exist. In addition, verification of the difference-in-differences based on the initiation event of the mutual traffic interconnection demonstrates the indirect network effect in the transportation business to a certain extent, and shows that the effect is not uniform in each business, with some businesses showing strong effects and others showing less visible effects.

scholarly journals Equilibrium Analysis for Platform Developers in Two-Sided Market with Backward Compatibility

Games ◽  
2018 ◽  
Vol 9 (4) ◽  
pp. 76
Author(s):  
Dohoon Kim
Keyword(s):  
Network Effects ◽  
Equilibrium Analysis ◽  
Network Effect ◽  
Relative Advantage ◽  
Stable Boundary ◽  
Backward Compatibility ◽  
Indirect Network Effects ◽  
Maximum Price ◽  
Key Factor ◽  
Upper Stage

We consider a dominant platform provider operating both legacy and new platforms that connects users with suppliers in a two-sided market context. In addition to the typical indirect network effects in the two-sided market, backward compatibility works on the new platform. Thus, users joining the new one can also enjoy the services provided by suppliers using the legacy platform. Users and suppliers are linearly differentiated between two platforms as in the Hotelling model and play a subscription game of choosing one platform at the lower level. The suppliers in the new platform may suffer from congestion, which can be alleviated by platform provider’s investment on the new one. The platform provider also determines price margins for the supplier sides. Our equilibrium (eq.) analysis in the subscription game identifies an interior eq. (coexistence of both platforms in both sides). Though the backward compatibility plays a stabilizing role for the interior eq., its stability is fragile due to the network effects. Rather, some boundary eq.’s, where at least one side tips to the legacy or the new platform, are more likely to be stable. The backward compatibility is a key factor that characterizes the stable boundary eq.’s. The upper stage game is led by the platform provider, which tries to maneuver the system toward one of the stable boundary eq.’s using price margins and investment. The platform provider prefers an all-new boundary eq. when the indirect network effect and the maximum price margin for the new platform are large; thus, it puts a significant investment in the new one. With a small indirect network effect for suppliers, however, the platform provider does not invest in the new platform and choose a separate boundary eq. where two sides split into different platforms. Whether the user side completely tips to the new one (completely separated eq.) or not (partially separated eq.) depends on the backward compatibility. The relative advantage of the all-new eq. over the separate eq.’s in terms of social welfare from both sides depends on the backward compatibility as well as the indirect network effects for the new platform.

scholarly journals Merger Control and Online Platforms: the Relevance of Network Effects

2017 ◽  
Vol 1 (2) ◽  
pp. 69-100
Author(s):  
Antonio Robles Martín-Laborda
Keyword(s):  
Network Effects ◽  
The Internet ◽  
Entry Barriers ◽  
Digital Platforms ◽  
Online Platforms ◽  
Indirect Network Effects ◽  
Direct Network ◽  
The One ◽  
The Impact ◽  
Direct Networks

Digital platforms operate in multisided markets providing services through the internet to two or more distinct groups of users, between which there are indirect network effects. Direct networks effects are frequently present within each group. Therefore, online platforms usually present both direct network effects, between individual members of the same group, and indirect network effects, between members of distinct groups. Network effects may simultaneously reduce competition leading to a greater concentration and strengthening entry barriers, on the one hand, and put forward significant efficiencies on the other. This article examines some keys aspects related to the impact of network effects on the assessment of mergers in two-sided markets, taking account of the recent practice of the Commission.

Principles for sharing economy formation in the digital society

2020 ◽  
Vol 16 (5) ◽  
pp. 800-821
Author(s):  
E.V. Popov ◽  
K.A. Semyachkov
Keyword(s):  
Network Effects ◽  
Sharing Economy ◽  
Network Effect ◽  
Industrial Society ◽  
Economic Activities ◽  
Digital Platforms ◽  
Digital Society ◽  
Modern Economy ◽  
Characteristic Features ◽  
The Impact

Subject. The article addresses economic relations that are formed in various areas of economic application of digital platforms. The target of the research is the modern economy of digital platforms across different economic activities. Objectives. The aim is to systematize principles for share economy formation in the context of the digital society development. Methods. We employ general scientific methods of research. Results. The study shows that the development of digital platforms is one of the most important trends in the development of the modern economy. We classified certain characteristic features of modern digital platforms, analyzed principles for their creation. The paper emphasizes that the network effects achieved through the use of digital platforms are an important factor in the development of the share economy. The network effect describes the impact of the number of the platform users on the value created for each of them. The paper also considers differences in the organization of traditional economy companies and companies that are based on the digital platform model, reveals specifics of changes in socio-economic systems caused by the development of digital platforms, systematizes principles of the sharing economy formation in the context of the digital society development. Conclusions. The analyzed principles for sharing economy development on the basis of digital platforms can be applied to create models for the purpose of forecasting the transformation of economic activity in the post-industrial society.

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