On the identification of critical mass in Internet-based services subject to network effects

Abstract

In many Internet-based services, network effects have a significant impact on the evolution of the market. In particular, critical mass is a fundamental element due to its relevance to the growth process of these kinds of services. The objective of this paper is to set out some of the difficulties concerning the identification of critical mass. According to more conventional approaches, the critical mass is defined by the product's demand curve and its price. However, as shown in this paper, it is not possible to define a critical mass in such a simple way, since market structure and companies' entry strategy will substantially modify the mass adoption process starting point. Results also have an impact on determining the value of a network. Conclusions and directions for further research are also discussed.

An overview of the service industries' future (priorities: linking past and future)

“…The Korean group uses Web 2.0 services mainly for social networking, whereas the US group uses them more for conducting their tasks. The Spanish group exhibits balanced and high-level usage of both social networking tool and task support tool (Arroyo- Barrigüete et al, 2010;Bendle & Patterson, 2010;Brás et al, 2010;Hsueh et al, 2010;Pechlaner & Bachinger, 2010;Scott & Laws, 2010). The results of this study suggest that global firm should consider the unique behaviour of Web 2.0 users when they develop strategies to leverage Web 2.0 services.…”

Incremental performance of an eChannel addition

“…The electronic commerce (e-commerce hereafter) literature has examined e-commerce to create new platforms for a competitive strategy (Celuch et al, 2007;Chang and Wang, 2011) with different advantages associated with adding the internet to the existing channel structure. These advantages include creating a better communication environment, providing more information to meet customer expectations, and support for the continuous development of a firm (Earl, 2000;Harrison et al, 2006;Canavan and Henchion, 2007;Simmons, 2008;Arroyo-Barrigüete et al, 2010). Venkatesan et al (2007) and Hsiao et al (2012) also found multichannel users to be significantly more profitable than single-channel users because multichannel users are active shoppers, purchase larger quantities, and spend more money.…”

The role of the alliance management capability

“…According to the proposed framework, (a) competitive performance depends on strategic alliances, but (b) the size of the impact of alliances depends on the role of knowledge-rich capabilities that are associated with alliancing (Arroyo- Barrigüete, Ernst, López-Sánchez, & Orero-Giménez, 2010;Brás, Costa, & Buhalis, 2010;Cockburn & Henderson, 1998;Duysters & Heimeriks, 2002;George, Zahra, Wheatley, & Khan, 2001). So, the role of the alliance management capability is that of a moderator.…”