reasons:
When a technology becomes more valuable the more it is adopted. Two primary sources are learning effects and network externalities.
1.Increasing returns to adoption
1)The Learning Curve: As a technology is used, producers learn to make it more efficient and effective. Cost decreases as performance increases.
2)Prior Learning and Absorptive Capacity:A firm’s prior experience influences its ability to recognize and utilize new information.
2. Network Externalities
1)In markets with network externalities, the benefit from using a good increases with the number of other users of the same good.
2)A technology with a large installed base attracts developers of complementary goods; a technology with a wide range of complementary goods attracts users, increasing the installed base. A self-reinforcing cycle ensues
3. Government Regulation
4. The Result: Winner-Take-All Markets
Multiple Dimensions of Value:
1. Technology’s Stand-alone Value
1)The functions the technology enables customers to perform
2)Its aesthetic qualities
3)Its ease of use, etc.
2.Network Externality Value
1)The size of the technology’s installed base
2)The availability of complementary goods
(To successfully overthrow an existing dominant technology, new technology often must either offer:
Dramatic technological improvement or
Compatibility with existing installed base and complements)
