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Network industries in the new economy

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McGee, John and Sammut-Bonnici, Tanya. (2002) Network industries in the new economy. European Business Journal, Volume 14 (Number 3). pp. 116-132. ISSN 0955-808X

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Abstract

In this paper we discuss two propositions: the supply and demand of knowledge, and network externalities. We outline the characteristics that distinguish knowledge- intensive industries from the general run of manufacturing and service businesses. Knowledge intensity and knowledge specialisation has developed as markets and globalisation have grown, leading to progressive incentives to outsource and for industries to deconstruct. The outcome has been more intensive competition. The paper looks at what is potentially the most powerful economic mechanism: positive feedback, alternatively known as demand-side increasing returns, network effects, or network externalities. We present alternative demand curves that incorporate positive feedback and discuss their potential economic and strategic consequences. We argue that knowledge supply and demand, and the dynamics of network externalities create new situations for our traditional industrial economy such that new types of economies of scale are emerging and "winner takes all" strategies are having more influence. This is the first of a pair of papers. A second paper will take the argument further and look at the nature of firms' strategies in the new world, arguing that technology standards, technical platforms, consumer networks, and supply chain strategies are making a significant contribution to relevant strategies within the new economy.

Item Type:

Journal Article

Subjects:

H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management

Divisions:

Faculty of Social Sciences > Warwick Business School > Marketing & Strategic Management
Faculty of Social Sciences > Warwick Business School

Library of Congress Subject Headings (LCSH):

Industries, Economics, Communication -- Network analysis , Strategic planning, Globalization

Journal or Publication Title:

European Business Journal

Publisher:

Whurr Publishers Ltd.

ISSN:

0955-808X

Official Date:

2002

Dates:

Date	Event
2002	Published

Volume:

Volume 14

Number:

Number 3

Page Range:

pp. 116-132

Status:

Peer Reviewed

Publication Status:

Published

Access rights to Published version:

Restricted or Subscription Access

References:

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