Author(s)
Pehr-Johan Norback, Lars Persson and Joacim Tag
Source
NET Institute Working Paper #08-02, September 2008
Summary
This paper provides a model and analysis of entrepreneurial innovations in industries characterized by network effects.
Policy Relevance
The information in this paper can be used to inform policy makers about the potential effects of policies in network industries.
Main Points
- Given the dynamics of network industries and the model and analysis provided in this paper, three possible policy interventions are discussed: increasing the degree of standardization in the industry, reducing fixed costs of lower entry barriers, and strengthening patent protection.
- The model discussed in this paper gives rise to several testable predictions:
- The ratio of innovation for sale over innovation of entry should be higher in network industries than in other industries
- The implementation of standardization policies should decrease the ratio of innovation for sale over innovation of entry
- The implementation of policies reducing fixed entry costs should decrease the ratio of innovation for sale over innovation for entry
- Total innovation output (patents) by entrepreneurs (independent investors) should be higher in network industries than in other industries
