The Network(ed) Economy (PDF)

In an increasingly globalized and networked world modern communication channels and new electronic media standards are constantly changing traditional interaction patterns of humans and even machines. Communication-based interaction is of pivotal economic importance and the availability of generally accepted electronic communication standards is essential in order to decrease communication-related transaction costs.



Roman Beck combines the theories of diffusion and network effects and presents a new goods classification model to explore the dissemination of IT and e-business standards. On this basis he designs two applications that support and improve firms' electronic interlaced communication by means of automation and standardization effects. He then examines how network effects drive the diffusion of communication standards and develops a model which is implemented as a simulation to show the dynamic interplay between direct and indirect network effects during the diffusion process. It also addresses critical mass and life cycle issues, as well as related utility changes in communication standards. The author concludes by detailing the connections between the new model and existing literature on network effects.



"Roman Beck breaks new ground in explaining the role of communication standards in the creation of positive network effects that have become central to the knowledge economy. This work is required reading for those interested in the mechanics and implications of adoption and diffusion of communication standards."

John Leslie King

Dean and Professor

School of information

University of Michigan, USA