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Executive Summary
Indirect network effects are of prime interest to marketers because they affect the growth and take-off of software availability for and hardware sales of a new product. However, empirical analysis of indirect network effects is rare. Furthermore, although the chicken-and-egg paradox (which comes first, software availability or hardware sales?) is cited to be important in these markets, it is not yet known which leads which. The authors examine nine consumer electronic markets (e.g., black-and-white television, CD, CD-ROM, color television, DVD, Game Boy, i-mode, Internet [WWW], and laser disc) to address these two issues. They show that (1) indirect network effects, as commonly operationalized by prior literature, are weaker than expected from prior literature and (2) hardware sales lead software availability, whereas the reverse almost never happens. These findings are supported by multiple methods, such as take-off and time-series analyses, and fit with the histories of the markets under study. The findings have important implications for academia, public policy, and management practice. For academia, the study identifies a need for new and more relevant conceptualizations of indirect network effects. For public policy, it questions the need for intervention in network markets. For management practice, it downplays the importance of the availability of a large library of software for hardware technology to be successful.

Biography
Stefan Stremersch is Professor of Marketing in the School of Economics at Erasmus University Rotterdam, the Netherlands, and Visiting Associate Professor of Marketing, Emory University. He received his PhD in Economics and Business Administration from Tilburg University, the Netherlands. During his doctoral education, he was a visiting scholar at University of Southern California from 1999 to 2001. His current research interest is in innovation diffusion and the marketing of technology and science. His work has appeared in leading scholarly journals, such as International Journal of Research in Marketing, Journal of Marketing, Journal of Marketing Research, and Marketing Science. His work has been covered by both the national and the international press (e.g., The Economist). He has won prestigious awards, such as the Harold H. Maynard Best Paper Award form the Journal of Marketing (2002) and the J.C. Ruigrok Prize for the most productive young researcher in the social sciences in the Netherlands. He also recently received the 2004 Research Prize at Erasmus University Rotterdam for outstanding research performance. He is an editorial board member of several journals, including Journal of Marketing, and chaired the INFORMS Marketing Science Conference (2004). He also serves as coeditor (with Don Lehmann) of International Journal of Research in Marketing. He has extensive consulting experience with technology companies, such as Siemens, IBM, Alcatel, and Dell, and often cooperates with various governments and European institutions. He has an extensive teaching record at the undergraduate and graduate levels in economics (at Erasmus University) and at the MBA level in business (at Goizueta Business School, Emory University).

Gerard J. Tellis (PhD Michigan) is the director of the Center for Global Innovation, Neely Chair of American Enterprise, and Professor of Marketing in the Marshall School of Business at the University of Southern California, Los Angeles. Dr. Tellis is a world-renowned expert in innovation, market entry, new product growth, global strategy, advertising, promotion, and pricing. He has published more than 80 articles and books on these topics (see http://www-rcf.usc.edu/~tellis/publications.htm). His articles have appeared in leading scholarly journals and have earned more than 900 citations (averaging more than 40 per year). His articles and books have won 15 awards, including four of the most prestigious awards in the field of marketing: the Frank M. Bass, William F. Odell, Harold D. Maynard (twice), and the Vijay Mahajan awards for lifetime contributions to marketing strategy. His book, titled Will and Vision: How Latecomers Grow to Dominate Markets (coauthored with Peter Golder, McGraw-Hill), refutes the common belief in first-mover advantages and explains the real causes of enduring market leadership. The book was cited as one of the top-ten books in business by the Harvard Business Review and won the American Marketing Association Berry Award for the best book in marketing over the past three years. His recent book, Effective Advertising: How, When, and Why Advertising Works, summarizes approximately 50 years of research on advertising effectiveness. Dr. Tellis is a trustee of the Marketing Science Institute and a senior research associate and Visiting Chair of Innovation, Marketing, and Strategy at the Judge Business School, Cambridge University, UK. He has also been a visiting fellow at Sidney Sussex College, Cambridge University, and a distinguished visitor at Erasmus University, Rotterdam. Previously, he worked as a sales development manager for Johnson & Johnson. Dr. Tellis consults with major multinational corporations; has been on the editorial review boards of Journal of Marketing Research, Journal of Marketing, and Marketing Science for several years; is associate editor of Journal of Marketing Research; and is a guest area editor for Marketing Science. Philip Hans Franses is Professor of Marketing Research and Professor of Econometrics, both at the Erasmus University Rotterdam. He regularly publishes his research outcomes in international journals and books. Currently, he serves as dean of the Erasmus School of Economics.

Jeroen L.G. Binken is a doctoral student of Marketing in the School of Economics at the Erasmus University Rotterdam, the Netherlands.   

Journal of Marketing, Vol. 71, No. 3, July 2007
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