| In recent years, significant academic and practical interest has developed in understanding how a dominant design emerges in the marketplace. The research efforts in this area have focused on discerning the reasons for one technological design's ultimate success over others in market-based competition. At the crux of the debate lies the notion of network effect; often considered as the single most significant factor which influences the outcome of dominant design competition. Perhaps, the most widely known example of such dominant design competition is the VCR-format war between BETA and VHS in the 1980s. The present study, exploratory in nature, extends the network effects-oriented explanation of dominate design phenomena.; The purpose of this dissertation is to understand the dynamic patterns of network effects and their implications for corporate competitive strategy. This study focuses on the analysis of network effects from a perspective of "hardware/software paradigm" in which the availability of complementary products (i.e., the software) primarily influences the characteristics of network effects in the sales of the main product (i.e., the hardware). The study tests empirically the assertion that consumers trade-off multiple product attributes, including network effects-causing variables, such as the availability of complementary software, in making a major technology adoption decision. The study uses the data from on-going dominant design competition in the U.S. home video game market. This dissertation employs a number of interrelated research methods, including focus group discussion, conjoint analysis experiment and market simulation.; The main findings of this dissertation are as follows. First, consumers consider network effects-causing variables as one of the major decision factors for technology adoption. Second, network effects are curvilinear in that the intensity of effects tends to increase rapidly at the low-to-medium values of the network effects-causing variable and diminish gradually, reaching a limit of medium-to-high values. Third, consumer heterogeneity also contributes to curvilinearity in network effects. Finally, the resultant "S-curve" pattern of network effects has significant implications for corporate strategies in dominant design competition, such as resource allocation, timing of market entry and exit, product marketing and technological innovation. The analysis of curvilinear network effects through curve-fitting and its theoretical implications for future research are also provided. |
