Market Entry in the Presence of Network Effects

Chintakananda, Asda; McIntyre, David P.

doi:10.1177/0149206311429861

Cited by 30 publications

(27 citation statements)

References 109 publications

(239 reference statements)

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“…Given that expectations of a platform's growth potential can influence users' product adoption choices, firms have strong incentives to signal and condition user expectations about their potential for future dominance (Chintakananda and McIntyre, ; Fuentelsaz et al , ). As such, several scholars have focused their attention on the impact of entry timing decisions to attract an early critical mass of users and serve as a signal of growth potential.…”

Section: Network and Platforms: Current Perspectivesmentioning

confidence: 99%

Networks, platforms, and strategy: Emerging views and next steps

McIntyre

Srinivasan

2016

Strategic Management Journal

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757

481

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Research summary:A substantial and burgeoning body of research has described the influence of platform-mediated networks in a wide variety of settings, whereby users and complementors desire compatibility on a common platform. In this review, we outline extant views of these dynamics from the industrial organization (IO) economics, technology management, and strategic management perspectives. Using this review as a foundation, we propose a future research agenda in this domain that focuses the on the relative influence of network effects and platform quality in competitive outcomes, drivers of indirect network effects, the nature and attributes of complementors, and leveraging complementor dynamics for competitive advantage.Managerial summary: In many industries, such as social networks and video games, consumers place greater value on products with a large network of other users and a large variety of complementary products. Such "network effects" offer lucrative opportunities for firms that can leverage these dynamics to create dominant technology platforms. This article reviews current perspectives on network effects and the emergence of platforms, and offers several areas of future consideration for optimal strategies in these settings.

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Section: Network and Platforms: Current Perspectivesmentioning

confidence: 99%

Networks, platforms, and strategy: Emerging views and next steps

McIntyre

Srinivasan

2016

Strategic Management Journal

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757

481

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“…This suggests that the real‐life decisions firms make regarding the acquisition, maintenance or exercise of such options can affect the value of other options a firm has, so these interactions need to be accounted for when making these decisions (Anand, Oriani, and Vassolo, ; Trigeorgis, ; Vassolo et al ., ). Moreover, even for single investment decisions, such as timing entry into a market, a firm may possess both deferral and growth options at once (Folta and O'Brien, ), and their value can, in turn, be affected by other factors such as network effects and technology evolution (Chintakananda and McIntyre, ).…”

Section: Fundamentals Of Real Options Theorymentioning

confidence: 99%

Real options theory in strategic management

Trigeorgis

Reuer

2016

Strategic Management Journal

326

247

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Research summary:This article provides a review of real options theory (ROT) in strategic management research. We review the fundamentals of ROT and provide a taxonomy of this research. By synthesizing and critiquing research on real options, we identify a number of important challenges as well as opportunities for ROT if it is to enhance its impact on strategic management and potentially develop into a theoretical pillar in the field. We examine how ROT can inform the key tensions that managers face between commitment versus flexibility as well as between competition versus cooperation, and we show how it can uniquely address the fundamental issues in strategy. We conclude with suggestions on future research directions that could enhance and unify the thus-far distinct main approaches to real options research. (e.g., joint ventures [JVs], foreign direct investment, research and development [R&D], etc.) and strategic decision making under uncertainty. This article provides a synthesis of this body of research in strategic management and related disciplines. We suggest how ROT can address fundamental issues of strategy, including the dilemmas managers face between commitment versus flexibility as well as between competition versus cooperation. We discuss how three distinct approaches to real options analysis can complement each other, and we identify some of the main challenges and opportunities for ROT to become a theoretical pillar in strategy. Managerial summary: Real options theory (ROT) applies the heuristics and valuation models originally designed for financial securities to the domain of corporate investment decisions

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“…That is, before a dominant platform emerges, potential participants in two-sided markets are assumed to be more likely to prefer the platform they believe will be the market leader in the future (Caillaud and Jullien 2003;Katz and Sharpio 1994). Extant literature hence predicts that new entrant platform firms have strong incentives to signal and condition potential participants' expectations about their future dominance (Chintakananda and McIntyre 2014). Accordingly, pre-announcing a new platform before it is functional may catalyze initial adoption by raising expectations among a sufficiently large number of people to where, once [In response to the question "Are you using paid adverting?"]…”

Section: The Management Of Expectationsmentioning

confidence: 99%

The dynamics of entry for digital platforms in two-sided markets: a multi-case study

Veisdal

2020

Electron Markets

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Motivating buyers and sellers to join an empty platform is thought to be a key challenge for firms attempting to launch digital platforms in two-sided markets. According to predictions from extant literature, 'no one joins until everyone joins'. The phenomenon is often referred to as the "chicken-and-egg problem". This study investigates the phenomenon in an exploratory multi-case study of ten startup technology firms operating digital platforms in two-sided markets. The study finds that the firms entered their markets using a variety of strategies distinguishable by strategic, relational and temporal factors. A conceptual framework is proposed which distinguishes the firms' strategies along these dimensions. In addition, a cross-case discussion of the dynamics of the firms' strategies is provided. Deductively, the findings contribute to establishing an empirical grounding for predictions from extant literature. Inductively, the findings contribute preliminary managerial implications as well as propositions for further research on entry strategies for digital platforms in two-sided markets.

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Market Entry in the Presence of Network Effects

Cited by 30 publications

References 109 publications

Networks, platforms, and strategy: Emerging views and next steps

Networks, platforms, and strategy: Emerging views and next steps

Real options theory in strategic management

The dynamics of entry for digital platforms in two-sided markets: a multi-case study

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