JOURNAL OF STRATEGIC INNOVATION AND SUSTAINABILITY
Network Effect as a Competitive Edge: What Have We Learnt From the Literature?
Author(s): Yu Peng Lin, Ablaye Camara
Citation: Yu Peng Lin, Ablaye Camara, (2020) "Network Effect as a Competitive Edge: What Have We Learnt From the Literature?," Journal of Strategic Innovation and Sustainability, Vol. 15, Iss. 7, pp. 43-52
Article Type: Research paper
Publisher: North American Business Press
Network effect is defined as the value that an additional user of a product has on that product’s value to others. In an industry exhibiting network effect, firms need to consider the possible role of the network being the establishment of a competitive edge. In this review, our goal is to synthesize the broad literature on network effects, and we put forward the argument that, in practice, network effect has quietly become a key factor in forming a firm’s competing strategy. In the presence of positive network effects, consumers’ willingness to pay is an increasing function of the network size.