Network Stability, Network Externalities and Technology Adoption

34 Pages Posted: 24 Jul 2011 Last revised: 28 Oct 2014

See all articles by Catherine E. Tucker

Catherine E. Tucker

Massachusetts Institute of Technology (MIT) - Management Science (MS)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2011

Abstract

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 to an investment bank's 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.

Suggested Citation

Tucker, Catherine E., Network Stability, Network Externalities and Technology Adoption (July 2011). NBER Working Paper No. w17246. Available at SSRN: https://ssrn.com/abstract=1893390

Catherine E. Tucker (Contact Author)

Massachusetts Institute of Technology (MIT) - Management Science (MS) ( email )

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