IT standards are subject to network effects which establish challenges concerning a successful diffusion of standards. A renowned example is a mobile service provider trying to establish a network of customers while potential user often wait until the network is sufficiently large in terms of other users (direct network effect) or content available (indirect effect). Despite the potential benefits to adopters and providers, there is still much uncertainty on the differential impact of direct and indirect network effects on the diffusion of standards and their impact on successful diffusion strategies to establish a user base. Our research questions thus are: (a) …what are the adoption drivers of IT standards and (b) …how can providers influence these drivers to develop an installed base? Based on network effect theory, we propose a formal model that simultaneously considers the different effects of direct and indirect network effects on the diffusion of communication standards. Using computer-based simulation we can show that IT providers could exploit the alternating impact of direct and indirect network effects at different diffusion stages to successfully establish an installed base. This has fundamental implications for the provider’s pricing and market strategy.
Beck, Roman; Beimborn, Daniel; Franke, Jochen; and Weitzel, Tim, "Strategies to Boost Standard Diffusion in Communication Networks Insights from Network Effect Theory" (2006). DIGIT 2006 Proceedings. 4.