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Splintering And Inertia In Network Industries

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  • TOBIAS KRETSCHMER

Abstract

We analyse a stylised game of technology adoption with network effects and two new technologies. Potential adopters can adopt early, late or not at all. We show that one of the reasons for the failure of new technologies can be the presence of multiple incompatible variants of that technology. An adopter's individual incentives to adopt are lower with two technologies than with one. Turning to aggregate expected welfare, we find that two active technologies may be welfare‐improving.

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  • Tobias Kretschmer, 2008. "Splintering And Inertia In Network Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 56(4), pages 685-706, December.
    • Handle: RePEc:bla:jindec:v:56:y:2008:i:4:p:685-706
    DOI: 10.1111/j.1467-6451.2008.00359.x
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    2. Claussen, Jörg & Kretschmer, Tobias & Spengler, Thomas, 2010. "Market leadership through technology – Backward compatibility in the U.S. Handheld Video Game Industry," Discussion Papers in Business Administration 12716, University of Munich, Munich School of Management.
    3. J. P. Eggers & Michał Grajek & Tobias Kretschmer, 2020. "Experience, Consumers, and Fit: Disentangling Performance Implications of Preentry Technological and Market Experience in 2G Mobile Telephony," Organization Science, INFORMS, vol. 31(2), pages 245-265, March.
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    5. Grajek, Michal, 2010. "Estimating network effects and compatibility: Evidence from the Polish mobile market," Information Economics and Policy, Elsevier, vol. 22(2), pages 130-143, May.
    6. Michal Grajek & Tobias Kretschmer, 2008. "Estimating critical mass in the global cellular telephony market," ESMT Research Working Papers ESMT-08-004 (R1), ESMT European School of Management and Technology, revised 15 Apr 2010.
    7. Cabral, Luís & Salant, David, 2014. "Evolving technologies and standards regulation," International Journal of Industrial Organization, Elsevier, vol. 36(C), pages 48-56.
    8. JP Eggers & Michal Grajek & Tobias Kretschmer, 2011. "Performance implications of core and complementary pre-entry experience: The role of consumer heterogeneity in mobile telephony," ESMT Research Working Papers ESMT-11-03 (R2), ESMT European School of Management and Technology, revised 29 May 2012.
    9. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107069978, October.
    10. Kerstan, Sven & Kretschmer, Tobias & Muehlfeld, Katrin, 2012. "The dynamics of pre-market standardization," Information Economics and Policy, Elsevier, vol. 24(2), pages 105-119.
    11. Timothy Simcoe & Jeremy Watson, 2019. "Forking, Fragmentation, and Splintering," Strategy Science, INFORMS, vol. 4(4), pages 283-297, December.
    12. Grajek, Michał & Kretschmer, Tobias, 2012. "Identifying critical mass in the global cellular telephony market," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 496-507.
    13. Matthias Berger & Christian Matt & Jochen Gönsch & Thomas Hess, 2019. "Is the Time Ripe? How the Value of Waiting and Incentives Affect Users’ Switching Behaviors for Smart Home Devices," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 71(1), pages 91-123, February.
    14. Johannes Loh & Tobias Kretschmer, 2023. "Online communities on competing platforms: Evidence from game wikis," Strategic Management Journal, Wiley Blackwell, vol. 44(2), pages 441-476, February.
    15. Claussen, Jörg & Kretschmer, Tobias & Spengler, Thomas, 2010. "Backward Compatibility to Sustain Market Dominance – Evidence from the US Handheld Video Game Industry," Discussion Papers in Business Administration 11499, University of Munich, Munich School of Management.
    16. Gandal Neil & Kunievsky Nadav & Branstetter Lee, 2021. "Network-Mediated Knowledge Spillovers in ICT/Information Security," Review of Network Economics, De Gruyter, vol. 19(2), pages 85-114, January.
    17. Tobias Kretschmer & Jörg Claussen, 2016. "Generational Transitions in Platform Markets—The Role of Backward Compatibility," Strategy Science, INFORMS, vol. 1(2), pages 90-104, June.
    18. J. P. Eggers, 2016. "Reversing course: Competing technologies, mistakes, and renewal in flat panel displays," Strategic Management Journal, Wiley Blackwell, vol. 37(8), pages 1578-1596, August.
    19. Jacobides, Michael G. & Cennamo, Carmelo & Gawer, Annabelle, 2024. "Externalities and complementarities in platforms and ecosystems: From structural solutions to endogenous failures," Research Policy, Elsevier, vol. 53(1).

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