The Network Effect and Information Sharing of Cross-Border e-Commerce: Manufacturers’ Productivity and Decisions

Abstract

The development of e-commerce platforms has resulted in changes in consumer behavior. Studies have also proven that e-commerce platforms could provide benefits to customers, such as the network effect and information sharing. With reference to existing research, this study extended the framework of the model proposed by Melitz (2003) and discovered that the zero cutoff profit (ZCP) curve and cross-border ZCP curve divided the area of the most likely combination of productivity levels into three regions. In addition, a combination of productivity levels closer to the upper-right corner indicates that the company is more capable of providing cross-border e-commerce services. If the consumer demand index of cross-border e-commerce platforms is different between two countries, then the country with the better cross-border e-commerce platforms is more likely to generate a network effect and increase information sharing among cross-border consumers, thereby helping the manufacturers to export more products and obtain higher profits.