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The interaction between direct and indirect network externalities in the early diffusion of mobile social networking

Author

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  • Emanuele Giovannetti

    (Anglia Ruskin University
    Hughes Hall, University of Cambridge)

  • Mohsen Hamoudia

    (Orange Labs
    PREDICONSULT)

Abstract

The early diffusion of mobile social networking (MSN) reflected the interplay of different factors: the affordability of better Internet connectivity and the diffusion of Smartphones suitable for Social Networking Applications. These key technology and cost drivers facilitated both the direct and indirect network externalities, which are necessary to overtake critical adoption barriers and facilitate users' decisions. However, a key challenge in modeling MSN diffusion is in distinguishing among the impact of these two types of network externalities. This paper addresses such a challenge by adopting a two-stage estimation strategy. In the first stage, we focus on direct network externalities by estimating a set of country-specific adoptions peaks that allow differentiating between early and late adopters. In the second stage, we estimate the impact of indirect network externalities on MSN diffusion while also considering the role of pricing strategies. Our results provide significant evidence that indirect network externalities can exert opposite effects on adoption between early adopters and followers, depending on whether they adopt before or after a country's MSN diffusion peak.

Suggested Citation

  • Emanuele Giovannetti & Mohsen Hamoudia, 2022. "The interaction between direct and indirect network externalities in the early diffusion of mobile social networking," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 12(4), pages 617-642, December.
    • Handle: RePEc:spr:eurasi:v:12:y:2022:i:4:d:10.1007_s40821-022-00208-1
    DOI: 10.1007/s40821-022-00208-1
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    More about this item

    Keywords

    Diffusion; Interaction models; Early adopters; Indirect network externalities; Mobile social networking;
    All these keywords.

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O35 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Social Innovation
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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