Network Stability, Network Externalities and Technology Adoption
Massachusetts Institute of Technology (MIT) - Management Science (MS)
March 20, 2011
NET Institute Working Paper No. 08-30
This paper investigates how the destabilizing of a social network may increase the scope of network externalities, using data on sales of a video-calling system made by a business-to- usiness manufacturer to banking employees and subsequent usage by these customers. The terrorist attacks of 2001 led potential customers in New York to start communicating with a new and less predictable set of people when their work teams were reorganized as a result of the physical displacement that resulted from the attacks. This did not happen in other comparable cities. These destabilized communication patterns were associated with potential adopters in New York being more likely to take into account a wider spectrum of the user base when deciding whether to adopt relative to those in other cities. Empirical analysis suggests that the aggregate effect of network externalities on adoption was doubled by this instability.
Number of Pages in PDF File: 34
Keywords: Network Effects, Social Networks, Stability
JEL Classification: LO, L86
Date posted: February 27, 2009 ; Last revised: September 4, 2014
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