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FIRM STRATEGIES IN THE COMPETITION FOR DOMINANCE OF NETWORKED BUSINESS SYSTEMS

The dissertation aims to contribute to the body of research on firm strategies in the context of network externalities, in order to better understand firm level competitive behaviour. The dissertation specifically focuses on the interaction of different types of firms when the focal firms are competing for dominance in an evolving networked business system. The research question is: What are the drivers affecting competitive behaviour in a network externality context, and what are the firm and aggregate level consequences of the competitive actions? The study uses bibliometric methods to map the scientific discourse about the phenomenon. The mapping highlights the relevant theoretical approaches investigating the phenomenon, including the evolutionary perspective on economics and population ecology. Researchers of these approaches have identified positive and negative feedback mechanisms leading to different competitive outcomes. Positive feedback is associated with divergence and diversification, while negative feedback is associated with congruence, imitation, and competitive effects. The dissertation investigates the positive and negative mechanisms in an empirical setting. The investigation focuses on one business environment at the time of the commercial introduction of a new technology. The investigated period was the launch of digital television in the United Kingdom between 1998-2002, the era between the commercial launch and an industry shakeout. The study builds on data from interviews, press releases, trade journals, internet discussion fora and stock market information. With the case approach, the dissertation aims at offering a rich view of the field while subjecting it to methodological and data triangulation. The analysis proceeds from the case narrative to social network analysis, content analysis, and qualitative comparative analysis. The case evidence describes how firms engaged in intense, resource-draining competition, with an outcome of increased aggregate adoption rates. In contrast to earlier work on network externalities, the dissertation emphasises that firms imitate at an early stage of market creation. The study shows that all firms including the industry leader are inclined to follow competitors’ behaviour at a time of intense rivalry. Building on previous research and the case examination, a new competitive metaphor and an integrated model of network market competition are developed. The dissertation contributes to the understanding of firm strategies in the presence of significant network externalities and proposes implications for managers and policy makers.