Opening the “Black Box” of Network Externalities in Network Adoption

Kauffman, Robert J.; McAndrews, James; Wang, Yuming

doi:10.1287/isre.11.1.61.11783

Cited by 219 publications

(130 citation statements)

References 39 publications

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“…Extending this stream of research by incorporating the concept of shared networks, Kauffman et al (2000) found support for the network externality hypothesis. …”

Section: Network Effectsmentioning

confidence: 88%

“…We summarize the limited empirical studies in Table 2. A few studies 7 have examined issues such as the adoption of spreadsheet software (Brynjolfsson and Kemerer 1996) and the diffusion of Bitnet nodes (Gurbaxani 1990), but none have focused on the important role of standards, especially in the context of Internet-based open standards (Kauffman et al 2000).…”

Section: Network Effectsmentioning

confidence: 99%

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Migration to Open-Standard Interorganizational Systems: Network Effects, Switching Costs, and Path Dependency

et al. 2006

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This study examines firms' migration across interorganizational systems (IOS) that are built on standards with relatively different degrees of openness. As firms seek to improve inter-firm coordination using adoption, yet the extant literature falls short of empirical testing of the theory. We examine our conceptual model on a large dataset of 1,394 firms. The empirical results demonstrate that network effects are a significant driver of migration to open-standard IOS. We also find that the effect of adoption costs is different for firms that are migrating from EDI (significantly negative) and firms that are not (no effect).While this finding may sound counter-intuitive, it illustrates the subtle role of path dependency in standards migration. Experience with older standards may keep the firm "trapped" and make it difficult to shift to open and potentially better standards. Our work also teases out finer-grained relationships such as the positive impact of trading community on the strength of network effects, and the importance of managerial complexity as a key determinant of adoption costs. Relative to the extant literature, this paper focuses on adoption of an open-standard network with broader impacts on value chain activities (compared to EDI networks), and with a wider scope of partner efforts involved in establishing network effects (compared to systems such as automated teller machine networks). Overall we believe that this study, based on a rigorous empirical analysis of a unique international dataset, provides valuable insights into a set of key factors that influence standards diffusion.

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“…Extending this stream of research by incorporating the concept of shared networks, Kauffman et al (2000) found support for the network externality hypothesis. …”

Section: Network Effectsmentioning

confidence: 88%

Section: Network Effectsmentioning

confidence: 99%

Migration to Open-Standard Interorganizational Systems: Network Effects, Switching Costs, and Path Dependency

et al. 2006

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“…Network externalities are the effects on a product user of other users consuming the same product, thereby expanding the analysis of adoption and diffusion beyond individual firms to the surrounding network of firms. Specifically, Kauffman, McAndrews, and Wang (2000) examine the impacts of several network variables on elapsed time for banks to adopt a shared ATM network. They find that the size of an individual bank's network increases the time for the network to adopt the shared IOS.…”

Section: Robey Et Al/interorganizational Systemsmentioning

confidence: 99%

Theoretical Foundations of Empirical Research on Interorganizational Systems: Assessing Past Contributions and Guiding Future Directions

Robey¹,

Im²,

Wareham³

2008

JAIS

170

196

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This paper guides the theoretical development of future research on interorganizational systems (IOS). We first assess past IOS research by reviewing and summarizing the findings of 51 empirical studies of IOS published in 11 IS journals between 1990 and 2003. This literature addresses three primary issues: (1) factors influencing organizational decisions to adopt IOS; (2) the impact of IOS on governance over economic transactions; and (3) the organizational consequences of IOS adoption. From our assessment of the findings and theoretical approaches taken in past research, we offer three recommendations for future research. First, the theoretical foundations of IOS research during this period are diverse, representing 17 different yet complementary theories. We recommend that researchers continue to diversify their theoretical approaches in order to address new research challenges. Second, we recommend that IOS researchers move beyond mere descriptions of IOS artifacts by engaging with IOS artifacts on theoretical grounds. Third, we identify and describe new theoretical directions for future IOS research in each of the main issue areas.

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“…Gandal (1994) and Brynjolfsson and Kemerer (1996) show that, other things being equal, users are willing to pay a premium for compatibility and goods with larger network in the software market. Kauffman, McAndrews, and Wang (2000) examine how prior investments in proprietary networking technology influence incentives to adopt a multi-bank electronic network.…”

Section: Switching Costs and Network Effectsmentioning

confidence: 99%

Network Effects and Switching Costs in the Market for Routers and Switches

Forman

Chen

2003

SSRN Journal

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This research examines the impact of switching costs on vendor choice in the market for routers and switches. We show that despite the use of open standards which attempt to enhance interoperabilities for equipments from different vendors, vendors in this market are able to maintain high switching costs. Because routers and switches are networked goods, switching costs may arise from prior investments made at the same establishment and/or at other establishments within the same firm. We study how the introduction of switches into the LAN market affected vendor choice in routers. In particular, we provide evidence of significant cross-product switching costs and sizeable shopping costs when buyers purchase routers and switches simultaneously. However, we also show that the introduction of switches may have temporarily reduced switching costs for router buyers investing in switches.

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Opening the “Black Box” of Network Externalities in Network Adoption

Cited by 219 publications

References 39 publications

Migration to Open-Standard Interorganizational Systems: Network Effects, Switching Costs, and Path Dependency

Migration to Open-Standard Interorganizational Systems: Network Effects, Switching Costs, and Path Dependency

Theoretical Foundations of Empirical Research on Interorganizational Systems: Assessing Past Contributions and Guiding Future Directions

Network Effects and Switching Costs in the Market for Routers and Switches

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