Companies that operate in competitive markets dominated by network externalities face distinct trade-offs regarding the choice of a technical standard. Holding on to a primary compatibility standard permits a firm's product to capture the value added by a large network. Conversely, the firm loses direct control over the market supply of the good and faces (direct) intra-platform competition. This trade-off is a key strategic decision that depends in part on the control that firms have in making their output compatible with competitors' outputs and complementary products. Industry output will be higher when there are network externalities and when standards are open. With incompatibility of standards market concentration, output inequality and price and profit inequality increase with the extent of the network externality. Where there are proprietary standards and strong network effects, there is no equilibrium in terms of network offerings. Competition, as we know it, can be compromised by the size consequences of the winner-takes-all phenomenon. The economic characteristics of network industries are dependent in large part on the interconnectivity that is characteristic of the technologies of information goods.

1. Diffusion of Technology Products
in Complex Markets
Professor Tanya Sammut-Bonnici
Pro Rector Strategic Planning and Enterprise
University of Malta

2. Research Issue
Top 10 Tech by Market Cap Nov 2019
• What type of Strategic Direction
leads to Market Dominance?
• Which Market Conditions protect
the Competitive Environments?
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3. Research Issue
Market Share Dominance &
Quasi Monopoly
Similar Market Share &
Competitive Environment
3 of 12Professor Tanya Sammut-Bonnici

4. Research Issue
Market Share Dominance &
Quasi Monopoly
• First mover advantage
• Winner takes all
• Increasing returns
• Network effect
• Critical mass
• Lock in
Similar Market Share &
Competitive Environment
• Homogenous products
• Similar technology platform
• Many firms (eg MNOs, MVNOs)
4 of 12Professor Tanya Sammut-Bonnici

5. Market Share Dominance (August 2019)
38%
36%
14%
6%
5%
1%
Android
Windows
iOS
OS x
Other
Linux
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6. Similar Market Shares
Market Shares
UK Mobile Communications Industry
%
%
%
%
%
%
%
%
%
4
5
6
7
8
9
0
1
2
3
4
5
6
7
8
9
0
1
2
3
Vodafone
O2
Orange
T -Mobile
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7. Research Framework
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8. Research Results
Connected Subscribers
UK Mobile Communications Industry
-
,000
,000
,000
,000
,000
,000
,000
ec-84
ec-86
ec-88
ec-90
ec-92
ec-94
ec-96
ec-98
ec-00
ec-02
bscribers
Cellnet Subscriber Base
Vodafone Subscriber Base
One2One Subscriber Base
Orange Subscriber Base
% Market Share
Connected Subscribers
UK Mobile Communications Industry
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
Dec-84
Dec-86
Dec-88
Dec-90
Dec-92
Dec-94
Dec-96
Dec-98
Dec-00
Dec-02
Subscribers
Cellnet Subscriber Base
Vodafone Subscriber Base
One2One Subscriber Base
Orange Subscriber Base
Connected Subscribers
UK Mobile Communications Industry
-
0,000
0,000
0,000
0,000
0,000
0,000
0,000
Dec-84
Dec-86
Dec-88
Dec-90
Dec-92
Dec-94
Dec-96
Dec-98
Dec-00
Dec-02
bscribers
C ellnet Subscriber Base
Vodafone Subs criber Bas e
One2One Subscriber Base
Orange Subscriber Base
Connected Subscribers
UK Mobile Communications Industry
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
Dec-84
Dec-86
Dec-88
Dec-90
Dec-92
Dec-94
Dec-96
Dec-98
Dec-00
Subscribers
C ellnet Subscriber Base
Vodafone Subs criber Bas e
One2One Subscriber Base
Orange Subscriber Base
1. Critical Mass @20%
Similar time frame of 18 months
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9. Comparison of UK and Japanese Diffusion Curves
for the Mobile Communications Industry
(Number of Years in Operation)
-
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Years
CumulativeSubscribers
UK
Japan
Research Results
2. Innovation Diffusion
Patterns
9 of 12Professor Tanya Sammut-Bonnici

10. Research Results
3. NETWORK EFFECTS
• Growth fuels growth,
more subscribers attract
even more subscribers
• Companies benefit equally
from each other’s growth in subscribers
• No correlation between one provider’s new users and its
strategic marketing activity
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11. Research Results
4. COMPLEX ADAPTIVE CONSUMER BEHAVIOUR
• No industry leader, shifting patterns of leadership
• Last entrant can achieve the highest market share
• Regulation as an enabler, number portability
5. ISOMORPHIC (COPY-CAT) STRATEGIES
• Tacit complicity for risk reduction
• Homogenous strategic behaviour
• Reduction of strategic differentiation
• Interconnectivity, common technology standards
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12. Research Results – Complex Adaptive Behaviour
6. Self-Reinforcing Mechanisms
Market Share Dominance & Quasi Monopoly
7. Balancing Factors
Similar Market Share & Competitive Environment
First Mover Advantage
Supply Chain Control
Lock In
Individual Network Effects &
Critical Mass
Risk Reduction:
Isomorphic Strategies
Homogenous Standards
Sharing of Technology Platforms
Mutual Shared:
Network Effects and Critical Mass
Last Entrants Share Advantage
12 of 12Professor Tanya Sammut-Bonnici