A Strategic Approach to Network Value in Network Industries

Abstract

This article extends previous research on network industries by analyzing the role that firm strategy plays in markets where network effects are important. The authors postulate that firms can benefit from the existence of network effects through their strategic choices. The main premise of this article is that companies, by influencing expectations, coordination, and compatibility, can leverage network effects and network value. The authors empirically test their hypotheses in the mobile telecommunications industry, a paradigmatic example of a network industry. This study not only seeks to understand the impact of firm strategy on network value but also analyzes the impact of the latter on firm performance.

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