Network Effects in the Knowledge Society
“Knowledge, networks and economic activity. Revisiting the network effects in the knowledge economy” paper by Universitat Oberta de Catalunya (Open University of Catalonia, UOC) lecturer, Joan Torrent, analyses the transformations in the supply and demand of observable and tacit knowledge goods deriving from network effects.
The article concludes that network effects on demand and the creation of value clearly differ in terms of the type of knowledge good involved.
The progressive consolidation of a knowledge-based economy has caused network effects to become a focal point of analysis into the changes in behaviour evinced by economic agents. This article analyses the changes in production and demand for knowledge commodities arising from network externalities. The analysis reveals two distinct patterns of behaviour in knowledge-based economic activity. Observable knowledge commodities are governed by the effect of direct and indirect network externalities. Also, their demand curve and business strategy depend on new-user entry (marginal value) and the relative size of the network. However, tacit knowledge commodities are governed by learning network externalities and their demand curve and business strategies are dependent on the value generated by the addition of the goods themselves to the network (intrinsic value).