Reconsidering the Assumptions for Tipping in Network Markets

Joel West, UC Irvine, Center for Research on Information Technologies and Organizations (CRITO)

1/01/2005
(Original Publish Date: 2000)

The work of Katz & Shapiro and others developed the concept of positive network externalities and switching costs as the key dynamics of standards competition. These researchers conclude that a positive feedback loop irrevocably “tips” a standards battle in favor of the standard with the largest share of users and complementary assets. Such theories have driven standards strategies by producers and users throughout information technology industries for the past decade. Using standards contests of the past 20 years, this paper examines the implicit assumptions of such theories and suggests examples where such assumptions do not appear to be valid.