Network Effects and Diffusion Theory: Extending Economic Network Analysis

Abstract

n this chapter, some of the main results of an interdisciplinary research project on standards are presented and integrated into a single framework of technology diffusion. Based on network-effect theory and diffusion theory, we present an agent-based simulation model that extends the traditional economical network perspective by incorporating structural determinants of networks (centrality, topology and density) from sociology and geography and individual standard decision making under realistic informational assumptions. The main finding is a substantial impact of network topology on standard diffusion. The model has so far served as a tool both for developing and evaluating network strategies in practical applications like EDI networks or corporate directory service planning, as well as for providing theoretical insights into standardization problems and possible solutions.