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Knowledge Products and Network Externalities: Implications for the Business Strategy

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This article analyses the changes in production and demand for knowledge products arising from network externalities. The demand curve of a product under network effects is concave in shape. This specificity is determined by the intrinsic value (value that it itself contributes), the marginal value (value contributed to other users of the network) and the relative size (size of the network in relation to the size of the market). The analysis reveals two distinct patterns of behaviour in knowledge-based products. Observable knowledge products are governed by the effect of direct and indirect network externalities. Also, their demand curve and business strategy depend on new-user entry (marginal value) and the relative size of the network. However, tacit knowledge products are governed by learning network externalities and their demand curve, and business strategies are dependent on the value generated by the addition of the goods themselves to the network (intrinsic value). Copyright Springer Science+Business Media New York 2015

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  • Joan Torrent-Sellens, 2015. "Knowledge Products and Network Externalities: Implications for the Business Strategy," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 6(1), pages 138-156, March.
    • Handle: RePEc:spr:jknowl:v:6:y:2015:i:1:p:138-156
    DOI: 10.1007/s13132-012-0122-7
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    1. Ballestar, María Teresa & Díaz-Chao, Ángel & Sainz, Jorge & Torrent-Sellens, Joan, 2020. "Knowledge, robots and productivity in SMEs: Explaining the second digital wave," Journal of Business Research, Elsevier, vol. 108(C), pages 119-131.
    2. Juan-Francisco Martínez-Cerdá & Joan Torrent-Sellens & Inés González-González & Pilar Ficapal-Cusí, 2018. "Opening the Black-Box in Lifelong E-Learning for Employability: A Framework for a Socio-Technical E-Learning Employability System of Measurement (STELEM)," Sustainability, MDPI, vol. 10(4), pages 1-27, March.
    3. Meir Russ, 2017. "The Trifurcation of the Labor Markets in the Networked, Knowledge-Driven, Global Economy," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 8(2), pages 672-703, June.
    4. Joan Torrent-Sellens & Jackeline Velazco-Portocarrero & Clara Viñas-Bardolet, 2018. "Knowledge-Based Work and Job Satisfaction: Evidence from Spain," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 9(2), pages 575-612, June.
    5. Shenglei Pi & Weining Cai, 2017. "Individual knowledge sharing behavior in dynamic virtual communities: the perspectives of network effects and status competition," Frontiers of Business Research in China, Springer, vol. 11(1), pages 1-17, December.
    6. Enrique Bernal Jurado & Adoración Mozas Moral & Miguel Jesús Medina Viruel & Domingo Fernández Uclés, 2018. "Evaluation of Corporate Websites and Their Influence on the Performance of Olive Oil Companies," Sustainability, MDPI, vol. 10(4), pages 1-11, April.

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