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This chapter summarizes the interdependence of network effects, compatibility standards and intellectual property rights (IPR) in the global economy. This interdependence is analyzed at the product market level and at the research and development level. The questions to be examined are: how IPR influence the provision of goods exhibiting network effects; the impact of network effects on the creation, dissemination and protection of intellectual property and of goods with strong intellectual property content; and strategic issues faced by firms and governments in goods that exhibit network effects. We answer these questions by studying how network effects influence the value of IPR and how in turn IPR may influence the size of networks. We highlight the central importance of IPR protection of interface standards for market outcomes, and how different types of IPR generate market power through interface standards. We review similarities of network effects in product markets and research networks as well as impediments to their expansion. We finally discuss alternative outcomes of standardization policies, institutional choices and strategic coordination efforts by firms. We emphasize how the answers to these questions are distinct in an international context.

Performance of firms in network industries depends much on the creation of standards around their technologies, products, or services. Establishing standards requires committing large, irreversible, upfront investment while demand remains uncertain. This paper focuses on the real options involved in this investment problem. The conventional real options literature recognizes the waiting-to-invest option where firms could avoid regret by waiting until at least some of the uncertainty is resolved. However, early commitment of network investment has vital strategic effects on shaping the expectations of potential users and inducing them to adopt the standard, thus creating a strategic growth option. We develop a simple model to explore the tradeoff between this strategic growth option and the waiting-to-invest option. We solve for the optimal investment rules and find that for high uncertainty, the strategic growth option often dominates the waiting-to-invest option and reduces the investment threshold. Furthermore, the intensity of network effect enhances the strategic growth option. Our results have important implications to the strategies of firms in technology industries.

While international business research has provided insights into the cross-border strategies and operations of firms in the manufacturing sector, understanding about service sector internationalization is less developed. This is especially important in light of the recent, rapid rise of digital businesses that now dominate the global economy. Understanding firms that operate using digital platforms requires a clear understanding of network effects, especially in terms of internationalization. Both the nature and the level (local, national, regional, or global) of the relevant network effects play roles in multinational enterprises’ incentives for internationalizing, their foreign entry choices (particularly with respect to sequencing), and the political interactions between businesses and the environments in which they operate.

Social media networks make their services freely available to all users. Users pay for the service received with the time and attention taken by the advertisements. This chapter argues that social media platforms are a unique form of monopoly driven by “the more the merrier” effect (i.e., network effects) in users' consumption. These monopolies exercise market power, not by charging higher prices to users but by “tying” larger amounts of advertising to their content. Traditional antitrust instruments designed to address excessive pricing and reduced output by monopolies need to be reframed to tame the attention economy problems in the social media industry. This chapter discusses five antitrust instruments grouped in three categories: structural, behavioral, and market-based remedies. Market-based solutions are the least explored in the literature, despite being the most promising instruments to lower the attention costs imposed on users, while preserving the economies of scope in production and the network effects in consumption, and possibly maintaining free access to social media, as we know it today.

We develop and test a model of how a software firm's business strategy (product scope and market scope) interacts with the firm's network position (alliance degree and structural holes) to impact performance. We test the joint-effects hypotheses on a sample 359 packaged software firms that have entered into 5,489 alliances involving 2,849 distinct firms during the time period, 1990–2002. While prior studies have demonstrated the importance of network positions as a determinant of firm strategy and performance, this chapter begins to examine the performance effects of how a firm's business strategy and network positions interact. We find support for three of the four hypotheses lending empirical support for our theoretical model. We develop implications for network-based perspectives of strategy and outline areas for further research.

This paper discusses the influence of human sociality on choice behavior, through association with social networks and the influence of these networks on constraints, perceptions, preferences, and decision-making processes. The paper discusses ways to incorporate these factors into choice models, while retaining the aspects of the theory of individual rationality that are predictive. Finally, the paper outlines an econometric method for solving the “reflection problem” of determining whether social affiliations follow preferences, or preferences follow social affiliations, by distinguishing opportunity-based and preference-based motivations for association with social networks.

The study this chapter reports focuses on how network theory contributes to the understanding of the internationalization process of SMEs and measures the effect of network capability on performance in international trade and has three research objectives.

The first objective of the study relates to providing new insights into the international market development activities through the application of a network perspective. The chapter reviews the international business literature to ascertain the development of thought, the research gaps, and the shortcomings. This review shows that the network perspective is a useful and popular theoretical domain that researchers can use to understand international activities, particularly of small, high technology, resource-constrained firms.

The second research objective is to gain a deeper understanding of network capability. This chapter presents a model for the impact of network capability on international performance by building on the emerging literature on the dynamic capabilities view of the firm. The model conceptualizes network capability in terms of network characteristics, network operation, and network resources. Network characteristics comprise strong and weak ties (operationalized as foreign-market entry modes), relational capability, and the level of trust between partners. Network operation focuses on network initiation, network coordination, and network learning capabilities. Network resources comprise network human-capital resources, synergy-sensitive resources (resource combinations within the network), and information sharing within the network.

The third research objective is to determine the impact of networking capability on the international performance of SMEs. The study analyzes 11 hypotheses through structural equations modeling using LISREL. The hypotheses relate to strong and weak ties, the relative strength of strong ties over weak ties, and each of the eight remaining constructs of networking capability in the study. The research conducts a cross-sectional study by using a sample of SMEs drawn from the telecommunications industry in Ireland.

The study supports the hypothesis that strong ties are more influential on international performance than weak ties. Similarly, network coordination and human-capital resources have a positive and significant association with international performance. Strong ties, weak ties, trust, network initiation, synergy-sensitive resources, relational capability, network learning, and information sharing do not have a significant association with international performance. The results of this study are strong (R2=0.63 for performance as the outcome) and provide a number of interesting insights into the relations between collaboration or networking capability and performance.

This study provides managers and policy makers with an improved understanding of the contingent effects of networks to highlight situations where networks might have limited, zero, or even negative effects on business outcomes. The study cautions against the tendency to interpret networks as universally beneficial to business development and performance outcomes.

Purpose – The purpose of this chapter is to explore the effects of team composition on justice climate strength. Specifically, we adopt a social network approach to justice in teams to explore the social-psychological mechanisms underlying diversity effects.

Design/methodology/approach – Using data from 80 self-managed project teams, we consider the impact of surface-level and deep-level diversity in teams on member social network ties and subsequently dispersion in their perceptions of procedural and interpersonal justice.

Findings – The results showed that diversity in team members’ psychological attributes – specifically, preferences for individualism – were associated with variability in members’ attachment to the team. In contrast, team gender and racial diversity were not significantly related to member social network ties. The results also demonstrated a relationship between network tie diversity and both procedural and interpersonal justice climate strength, such that variability in members’ attachment to the team was related to variability in their justice perceptions.

Overall, these findings demonstrate that teams characterized by higher levels of deep-level diversity may experience greater variability in their social interactions, which amplify variability in members’ justice perceptions.

Implications – Practically, these findings suggest that potential performance advantages of informational diversity in teams may come at a cost, as such diversity may reduce the quality of members’ justice experiences. Theoretically, they provide insight into the nature of the relationship between diversity and justice, which is largely dependent on the social psychological processes evoked by diversity. They also highlight team social networks as a useful means for examining such processes and understanding the operation of justice in teams.

Knowledge sharing is a fundamental source of competitive advantage. Social networks are thought to play an important role in knowledge sharing, but are presumed to create a trade-off such that a network can be optimized to promote either knowledge seeking or knowledge transfer, but not both. The trade-off, however, is premised on, and representative of a broader tendency to treat, brokerage and closure as contradictory network forms. We challenge this assertion and propose a theory of knowledge sharing with brokerage and closure as compatible and complementary. Evidence from a contract research and development firm broadly supports our theory. We also report the results of a simulation analysis, which illustrate that only in the extremely rare case when a network is characterized by nearly complete balance do brokerage and closure begin to create a trade-off.