IDEAS home Printed from https://ideas.repec.org/a/eee/tefoso/v94y2015icp170-186.html
   My bibliography  Save this article

Keystone effect on entry into two-sided markets: An analysis of the market entry of WiMAX

Author

Listed:
  • Kang, Jin-Su
  • Downing, Stephen

Abstract

We investigate a market entry scenario where a technologically-superior new platform may overcome its installed base disadvantage with the backing of a strong keystone species advantage within the business ecosystem, called keystone effect in this study, over an incumbent in a market that exhibits indirect network effects. The strength of the keystone species impacts the availability of complementary goods, which is a key factor for a platform to increase its installed base. This study proposes a dynamic economic model to map a market landscape that shows the internal condition (entrant's keystone effect) and external conditions (incumbent's keystone effect and indirect network effects) under which a new platform can successfully enter (i.e., maintain oligopoly or monopoly share) or fail to enter a two-sided market in a winner-take-all scenario. We then illustrate the model's applicability by examining the entry of Worldwide Interoperability for Microwave Access (WiMAX) into the global mobile telecommunications market, employing recent market data from 2009 to 2012 as well as forecast scenario data from 2010 to 2014. In both the historical data and hypothetical forecast scenario we find that WiMAX's keystone effect disadvantage and the market's indirect network effects were cumulatively strong enough to prevent the new technology standard from successfully competing with the incumbent (cellular 3G and Long Term Evolution) for oligopoly or monopoly share in the long run.

Suggested Citation

  • Kang, Jin-Su & Downing, Stephen, 2015. "Keystone effect on entry into two-sided markets: An analysis of the market entry of WiMAX," Technological Forecasting and Social Change, Elsevier, vol. 94(C), pages 170-186.
    • Handle: RePEc:eee:tefoso:v:94:y:2015:i:c:p:170-186
    DOI: 10.1016/j.techfore.2014.09.008
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0040162514002789
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.techfore.2014.09.008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Wu, De-Min, 1973. "Alternative Tests of Independence Between Stochastic Regressors and Disturbances," Econometrica, Econometric Society, vol. 41(4), pages 733-750, July.
    2. Sobolewski, Maciej & Czajkowski, MikoŁaj, 2012. "Network effects and preference heterogeneity in the case of mobile telecommunications markets," Telecommunications Policy, Elsevier, vol. 36(3), pages 197-211.
    3. Kang, Jin-Su & Lee, Hong-Yuh & Tsai, Julio, 2011. "An analysis of interdependencies in mobile communications technology: The case of WiMAX and the development of a market assessment model," Technology in Society, Elsevier, vol. 33(3), pages 284-293.
    4. Sangin Park, 2004. "Quantitative Analysis of Network Externalities in Competing Technologies: The VCR Case," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 937-945, November.
    5. Daniel Birke & G. M. Peter Swann, 2007. "Network effects and the choice of mobile phone operator," Springer Books, in: Uwe Cantner & Franco Malerba (ed.), Innovation, Industrial Dynamics and Structural Transformation, pages 109-128, Springer.
    6. Chou, Chien-fu & Shy, Oz, 1990. "Network effects without network externalities," International Journal of Industrial Organization, Elsevier, vol. 8(2), pages 259-270, June.
    7. Matthew T. Clements & Hiroshi Ohashi, 2005. "Indirect Network Effects And The Product Cycle: Video Games In The U.S., 1994–2002," Journal of Industrial Economics, Wiley Blackwell, vol. 53(4), pages 515-542, December.
    8. 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.
    9. Kim, Hee-Su & Kwon, Namhoon, 2003. "The advantage of network size in acquiring new subscribers: a conditional logit analysis of the Korean mobile telephony market," Information Economics and Policy, Elsevier, vol. 15(1), pages 17-33, March.
    10. James Wade, 1995. "Dynamics of organizational communities and technological bandwagons: An empirical investigation of community evolution in the microprocessor market," Strategic Management Journal, Wiley Blackwell, vol. 16(S1), pages 111-133.
    11. Kevin Boudreau, 2010. "Open Platform Strategies and Innovation: Granting Access vs. Devolving Control," Management Science, INFORMS, vol. 56(10), pages 1849-1872, October.
    12. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    13. Godfrey, Leslie G, 1978. "Testing for Higher Order Serial Correlation in Regression Equations When the Regressors Include Lagged Dependent Variables," Econometrica, Econometric Society, vol. 46(6), pages 1303-1310, November.
    14. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-841, August.
    15. Pierpaolo Andriani & Bill McKelvey, 2007. "Beyond Gaussian averages: redirecting international business and management research toward extreme events and power laws," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(7), pages 1212-1230, December.
    16. Choi, Jay Pil, 1994. "Network Externality, Compatibility Choice, and Planned Obsolescence," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 167-182, June.
    17. Erik Brynjolfsson & Chris F. Kemerer, 1996. "Network Externalities in Microcomputer Software: An Econometric Analysis of the Spreadsheet Market," Management Science, INFORMS, vol. 42(12), pages 1627-1647, December.
    18. Zhang, Jing & Liang, Xiong-Jian, 2011. "Business ecosystem strategies of mobile network operators in the 3G era: The case of China Mobile," Telecommunications Policy, Elsevier, vol. 35(2), pages 156-171, March.
    19. Fu, W. Wayne, 2004. "Termination-discriminatory pricing, subscriber bandwagons, and network traffic patterns: the Taiwanese mobile phone market," Telecommunications Policy, Elsevier, vol. 28(1), pages 5-22, February.
    20. Harikesh Nair & Pradeep Chintagunta & Jean-Pierre Dubé, 2004. "Empirical Analysis of Indirect Network Effects in the Market for Personal Digital Assistants," Quantitative Marketing and Economics (QME), Springer, vol. 2(1), pages 23-58, March.
    21. Jean-Pierre H. Dubé & Günter J. Hitsch & Pradeep K. Chintagunta, 2010. "Tipping and Concentration in Markets with Indirect Network Effects," Marketing Science, INFORMS, vol. 29(2), pages 216-249, 03-04.
    22. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, June.
    23. Farrell, Joseph & Klemperer, Paul, 2007. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 31, pages 1967-2072, Elsevier.
    24. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
    25. Strube, Jochen & Schade, Sven & Schmidt, Patrick & Buxmann, Peter, 2007. "Simulating Indirect Network Effects in the Video Game Market," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 103187, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    26. Neil Gandal & Michael Kende & Rafael Rob, 2000. "The Dynamics of Technological Adoption in Hardware/Software Systems: The Case of Compact Disc Players," RAND Journal of Economics, The RAND Corporation, vol. 31(1), pages 43-61, Spring.
    27. Godfrey, Leslie G, 1978. "Testing against General Autoregressive and Moving Average Error Models When the Regressors Include Lagged Dependent Variables," Econometrica, Econometric Society, vol. 46(6), pages 1293-1301, November.
    28. Strube, Jochen & Schade, Sven & Schmidt, Patrick & Buxmann, Peter, 2007. "Simulating Indirect Network Effects in the Video Game Market," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 36555, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    29. Church, Jeffrey & Gandal, Neil, 1992. "Network Effects, Software Provision, and Standardization," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 85-103, March.
    30. Eirik Gaard Kristiansen, 1998. "R&D in the Presence of Network Externalities: Timing and Compatibility," RAND Journal of Economics, The RAND Corporation, vol. 29(3), pages 531-547, Autumn.
    31. MacKinnon, James G. & White, Halbert, 1985. "Some heteroskedasticity-consistent covariance matrix estimators with improved finite sample properties," Journal of Econometrics, Elsevier, vol. 29(3), pages 305-325, September.
    32. Hiroshi Ohashi, 2003. "The Role of Network Effects in the US VCR Market, 1978–1986," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(4), pages 447-494, December.
    33. Hausman, Jerry A. & Taylor, William E., 1981. "A generalized specification test," Economics Letters, Elsevier, vol. 8(3), pages 239-245.
    34. Amiya Basu & Tridib Mazumdar & S. P. Raj, 2003. "Indirect Network Externality Effects on Product Attributes," Marketing Science, INFORMS, vol. 22(2), pages 209-221, April.
    35. Chuang, Yi-Fei, 2011. "Pull-and-suck effects in Taiwan mobile phone subscribers switching intentions," Telecommunications Policy, Elsevier, vol. 35(2), pages 128-140, March.
    36. Gunasekaran, Vinoth & Harmantzis, Fotios C., 0. "Towards a Wi-Fi ecosystem: Technology integration and emerging service models," Telecommunications Policy, Elsevier, vol. 32(3-4), pages 163-181, April.
    37. Gerstheimer, Oliver & Lupp, Christian, 2004. "Needs versus technology--the challenge to design third-generation mobile applications," Journal of Business Research, Elsevier, vol. 57(12), pages 1409-1415, December.
    38. Corts, Kenneth S. & Lederman, Mara, 2009. "Software exclusivity and the scope of indirect network effects in the U.S. home video game market," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 121-136, March.
    39. Schilling, Melissa, 1999. "Winning the standards race: : Building installed base and the availability of complementary goods," European Management Journal, Elsevier, vol. 17(3), pages 265-274, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yuki Inoue, 2019. "Winner-Takes-All or Co-Evolution among Platform Ecosystems: A Look at the Competitive and Symbiotic Actions of Complementors," Sustainability, MDPI, vol. 11(3), pages 1-25, January.
    2. Chao Zhang & Jiancheng Guan, 2017. "How to identify metaknowledge trends and features in a certain research field? Evidences from innovation and entrepreneurial ecosystem," Scientometrics, Springer;Akadémiai Kiadó, vol. 113(2), pages 1177-1197, November.
    3. Patrick Loux & Mathilde Aubry & Sébastien Tran & Emmanuel Baudoin, 2020. "Multi-sided platforms in B2B contexts : the role of affiliation costs and interdependencies in adoption decisions," Post-Print hal-02376313, HAL.
    4. Yuki Inoue & Masataka Hashimoto & Takeshi Takenaka, 2019. "Effectiveness of Ecosystem Strategies for the Sustainability of Marketplace Platform Ecosystems," Sustainability, MDPI, vol. 11(20), pages 1-33, October.
    5. Huotari, Pontus & Järvi, Kati & Kortelainen, Samuli & Huhtamäki, Jukka, 2017. "Winner does not take all: Selective attention and local bias in platform-based markets," Technological Forecasting and Social Change, Elsevier, vol. 114(C), pages 313-326.
    6. Inoue, Yuki & Tsujimoto, Masaharu, 2018. "New market development of platform ecosystems: A case study of the Nintendo Wii," Technological Forecasting and Social Change, Elsevier, vol. 136(C), pages 235-253.
    7. Zhou, Yongyi & Zhang, Yulin & Goh, Mark, 2023. "Platform responses to entry in a local market with mobile providers," European Journal of Operational Research, Elsevier, vol. 309(1), pages 236-251.
    8. Fabian Schueler & Dimitri Petrik, 2022. "Objectives of platform research: A co-citation and systematic literature review analysis," Papers 2202.08822, arXiv.org.
    9. Nishikawa, Bruna T. & Orsato, Renato J., 2021. "Professional services in the age of platforms: Towards an analytical framework," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    10. Inoue, Yuki, 2021. "Indirect innovation management by platform ecosystem governance and positioning: Toward collective ambidexterity in the ecosystems," Technological Forecasting and Social Change, Elsevier, vol. 166(C).
    11. Silvia Blasi & Silvia Rita Sedita, 2020. "The diffusion of a policy innovation in the energy sector: evidence from the collective switching case in Europe," Industry and Innovation, Taylor & Francis Journals, vol. 27(6), pages 680-704, June.
    12. Yuki Inoue & Takeshi Takenaka & Koichi Kurumatani, 2019. "Sustainability of Service Intermediary Platform Ecosystems: Analysis and Simulation of Japanese Hotel Booking Platform-Based Markets," Sustainability, MDPI, vol. 11(17), pages 1-22, August.
    13. Lee, Changjun & Hwang, Junseok, 2018. "The influence of giant platform on content diversity," Technological Forecasting and Social Change, Elsevier, vol. 136(C), pages 157-165.
    14. Gomes, Leonardo Augusto de Vasconcelos & Facin, Ana Lucia Figueiredo & Salerno, Mario Sergio & Ikenami, Rodrigo Kazuo, 2018. "Unpacking the innovation ecosystem construct: Evolution, gaps and trends," Technological Forecasting and Social Change, Elsevier, vol. 136(C), pages 30-48.
    15. Jacob Hileman & Ivan Kallstenius & Tiina Häyhä & Celinda Palm & Sarah Cornell, 2020. "Keystone actors do not act alone: A business ecosystem perspective on sustainability in the global clothing industry," PLOS ONE, Public Library of Science, vol. 15(10), pages 1-17, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Steiner, Michael & Wiegand, Nico & Eggert, Andreas & Backhaus, Klaus, 2016. "Platform adoption in system markets: The roles of preference heterogeneity and consumer expectations," International Journal of Research in Marketing, Elsevier, vol. 33(2), pages 276-296.
    2. Jullien, Bruno & Pavan, Alessandro & Rysman, Marc, 2021. "Two-sided Markets, Pricing, and Network Effects," TSE Working Papers 21-1238, Toulouse School of Economics (TSE).
    3. Daniel Birke, 2009. "The Economics Of Networks: A Survey Of The Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 23(4), pages 762-793, September.
    4. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107069978.
    5. Scott K. Shriver, 2015. "Network Effects in Alternative Fuel Adoption: Empirical Analysis of the Market for Ethanol," Marketing Science, INFORMS, vol. 34(1), pages 78-97, January.
    6. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899.
    7. Garcia-Swartz, Daniel D. & Garcia-Vicente, Florencia, 2015. "Network effects on the iPhone platform: An empirical examination," Telecommunications Policy, Elsevier, vol. 39(10), pages 877-895.
    8. Kim, Jin-Hyuk & Prince, Jeffrey & Qiu, Calvin, 2014. "Indirect network effects and the quality dimension: A look at the gaming industry," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 99-108.
    9. Edward G. Anderson & Geoffrey G. Parker & Burcu Tan, 2014. "Platform Performance Investment in the Presence of Network Externalities," Information Systems Research, INFORMS, vol. 25(1), pages 152-172, March.
    10. Stremersch, S. & Tellis, G.J. & Franses, Ph.H.B.F. & Binken, J.L.G., 2007. "Indirect Network Effects in New Product Growth," ERIM Report Series Research in Management ERS-2007-019-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    11. Binken, J.L.G. & Stremersch, S., 2008. "The Effect of Superstar Software on Hardware Sales in System Markets," ERIM Report Series Research in Management ERS-2008-025-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    12. Rodolphe Durand & Robert M. Grant & Tammy L. Madsen & David P. McIntyre & Arati Srinivasan, 2017. "Networks, platforms, and strategy: Emerging views and next steps," Strategic Management Journal, Wiley Blackwell, vol. 38(1), pages 141-160, January.
    13. Jean-Pierre H. Dubé & Günter J. Hitsch & Pradeep K. Chintagunta, 2010. "Tipping and Concentration in Markets with Indirect Network Effects," Marketing Science, INFORMS, vol. 29(2), pages 216-249, 03-04.
    14. Gretz, Richard T. & Basuroy, Suman, 2013. "Why Quality May Not Always Win: The Impact of Product Generation Life Cycles on Quality and Network Effects in High-tech Markets," Journal of Retailing, Elsevier, vol. 89(3), pages 281-300.
    15. Gretz, Richard T., 2010. "Hardware quality vs. network size in the home video game industry," Journal of Economic Behavior & Organization, Elsevier, vol. 76(2), pages 168-183, November.
    16. 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.
    17. Doganoglu, Toker & Grzybowski, Lukasz, 2007. "Estimating network effects in mobile telephony in Germany," Information Economics and Policy, Elsevier, vol. 19(1), pages 65-79, March.
    18. Yue Liu & Rong Luo, 2023. "Network Effects and Multinetwork Sellers’ Dynamic Pricing in the U.S. Smartphone Market," Management Science, INFORMS, vol. 69(6), pages 3297-3318, June.
    19. Richards, Timothy J. & Hamilton, Stephen F., 2018. "Food waste in the sharing economy," Food Policy, Elsevier, vol. 75(C), pages 109-123.
    20. Pinar Karaca-Mandic, 2011. "Role of complementarities in technology adoption: The case of DVD players," Quantitative Marketing and Economics (QME), Springer, vol. 9(2), pages 179-210, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:tefoso:v:94:y:2015:i:c:p:170-186. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.sciencedirect.com/science/journal/00401625 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.