FIRST IN, FIRST OUT?THE EFFECTS OF NETWORK EXTERNALITIES ON PIONEER SURVIVAL

Raji Srinivasan, Gary L. Lilien, and Arvind Rangaswamy

1/01/2005
(Original Publish Date: 2004)

Network externalities are playing an increasingly important role in the economy, with significant implications for marketing strategies of firms. We study the effects of network externalities, in conjunction with other product and firm characteristics, on the survival of pioneers. We apply an accelerated failure time model to data on forty-five office products and consumer durables. We find evidence that network externalities have a negative main effect on the survival duration of pioneers. However, for more radical products, and for technologically intense products, increases in network externalities are associated with increased survival duration. The larger the pioneer, the more network externalities increase its survival duration, while incumbent pioneers see a decrease in survival duration relative to non-incumbents. The findings of this paper contribute to theory in marketing strategy and have important implications for firms developing market entry strategies for products with network externalities.