nep-net New Economics Papers
on Network Economics
Issue of 2007‒08‒18
four papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. “Exclusive Licensing in Complementary Network Industries” By Ravi Mantena; Ramesh Sankaranarayanan; Siva Viswanathan
  2. “Lock-In and Unobserved Preferences in Server Operating System Adoption: A Case of Linux vs. Windows" By Seung-Hyun Hong; Leonardo Rezende;
  3. Social Networks in The Boardroom By Francis Kramarz; David Thesmar
  4. The mechanics of production networks in Southeast Asia: the fragmentation theory approach By Fukunari Kimura

  1. By: Ravi Mantena (Simon Graduate School of Business Administration, University of Rochester); Ramesh Sankaranarayanan (School of Business, University of Connecticut); Siva Viswanathan (Smith School of Business, University of Maryland)
    Abstract: This paper develops and analyzes a model of competition between platforms in an industry with indirect network effects, with a specific focus on complementary product exclusivity. The objective is to understand the determinants of exclusivity and explore its effects on competition. We find that the stage of platform market maturity and the asymmetry between the installed bases of platforms are critical determinants of exclusivity. Exclusivity is the dominant outcome in the nascent stage of the platform market and is sometimes the outcome in mature stages as well, while non-exclusivity is the usual outcome in the intermediate stages. In the nascent stages, the bigger platform secures exclusivity, while in the mature stages it is the smaller platform.
    Keywords: Licensing; exclusive; networks; complementarity
    Date: 2007–04
  2. By: Seung-Hyun Hong (University of Illinois); Leonardo Rezende (University of Illinois);
    Abstract: This paper attempts to distinguish state dependence (or lock-in) from unobserved preferences in the decision to adopt Linux or Windows as the operating system for computer servers. To this end, we use detailed survey data of over 100,000 establishments in the United States. Without accounting for unobserved heterogeneity in establishment-specific preferences for operating systems, we find a strong positive correlation between the current choice and the previous choice, suggesting potentially high switching costs and lock-in. To account for unobserved preferences for either operating system, we impose weak identifying assumptions and employ recently developed dynamic discrete choice panel data methods (Arellano and Carrasco 2003). The results show little or no evidence of state dependence, implying that unobserved preferences, rather than switching costs and lock-in, are more important factors in the adoption decision. Once taste heterogeneity is taken into account, we additionally find little evidence of network effects between server operating systems and non-server operating systems.
    Date: 2007–04
  3. By: Francis Kramarz; David Thesmar
    Abstract: This paper provides empirical evidence consistent with the facts that (1) social networks may strongly affect board composition and (2) social networks may be detrimental to corporate governance. Our empirical investigation relies on a large dataset on executives and outside directors of corporations listed on the Paris stock exchange over the 1992-2003 period. This data source is a matched employer employee dataset providing both detailed information on directors/CEOs and information on the firm employing them. We first find a very strong and robust correlation between the CEO’s network and that of his directors. Networks of former high ranking civil servants are the most active in shaping board composition. Our identification strategy takes into account (1) firm and directors’ fixed effects and (2) matching of firms and director along one observable and one unobservable characteristic. We then turn to real effects of such network activity. We find that firms where these networks are most active are less likely to change CEO when they underperform. This suggests that social networks in the board room impair corporate governance.
    Date: 2006–11
  4. By: Fukunari Kimura
    Abstract: Southeast Asia is truly a unique area in that it deeply gets involved with sophisticated international production networks extended to the whole East Asia. This chapter provides an overview on the current status of economic analysis on this issue, placing its emphasis on the newly developed fragmentation theory approach. The two-dimensional fragmentation model is introduced and employed for disentangling the mechanics of production networks as well as the spatial structure of networking in East Asia. Profound policy implication for further activating production networks and economic development in Southeast Asia and other less developed countries is also discussed.
    Date: 2007–05

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