Network externalities in the digital economy

The globalisation of modern market economies has significantly altered business behaviour and encouraged the use of new technologies. Competition has taken on a new dimension and relevant markets have expanded their territorial dimension.

On 23 December 2004, the Director of the Foundation signed a research agreement with Professor José Luis Arroyo Barrigüete to carry out the research entitled Network Externalities in the Digital Economy: development of a Competition Model between eBusiness Technologies subject to network effects. The aim of the research was to delve into the business implications of network externalities in the context of electronic markets.

The study approaches the issue from different perspectives, such as the industry-market perspective. On the other hand, starting from the company as the unit of analysis, it is possible to orient the study from the perspective of resources and capabilities. The latter approach was chosen, analysing how the performance of the firm, conditioned by its own capabilities and resources, can affect network externalities.

This approach is justified, among other reasons, by the fact that revised versions of resource theory, based on ideas such as dynamic capabilities, knowledge or learning, seem designed for the study of virtual markets, since they focus on issues that define the idiosyncrasies of virtual markets: dynamism, adaptation, turbulence, etc..

The content of this research materialised in the book "Network Externalities in the Digital Economy" published in 2007.

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