Abstract
We analyze technology adoption in industries where network externalities are significant. The pattern of adoption depends on whether technologies are sponsored. A sponsor is an entity that has property rights to the technology and hence is willing to make investments to promote it. Key findings include the following: (1) compatibility tends to be undersupplied by the market, but excessive standardization can occur; (2) in the absence of sponsors, the technology superior today has a strategic advantage and is likely to dominate the market; (3) when one of two rival technologies is sponsored, that technology has a strategic advantage and may be adopted even if it is inferior; (4) when two competing technologies both are sponsored, the technology that will be superior tomorrow has a strategic advantage.
Keywords
Network effectStandardizationIndustrial organizationBusinessExternalityEmerging technologiesKey (lock)MarketingEconomicsMicroeconomicsComputer scienceComputer security
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Publication Info
- Year
- 1986
- Type
- article
- Volume
- 94
- Issue
- 4
- Pages
- 822-841
- Citations
- 2611
- Access
- Closed
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Cite This
Michael L. Katz,
Carl Shapiro
(1986).
Technology Adoption in the Presence of Network Externalities.
Journal of Political Economy
, 94
(4)
, 822-841.
https://doi.org/10.1086/261409
Identifiers
- DOI
- 10.1086/261409