The Impact of Direct and Indirect Network Effects on the Diffusion of Communication Standards

Expectations about stand-alone and network benefits determine the adoption decision of customers and hence the diffusion of standards. To increase the number of adopters of a communication standard like EDI, not only the ability to exchange messages (as a source of direct network effects), but also the provision of complementary services such as standardized master data, e.g., by establishing a central, industrywide EDI data pool (as a source of indirect network effects) is important. We thus examine the differing impact of direct and indirect network effects on the adoption and diffusion of communication standards. The incorporation of both network benefits into an agent-based simulation model may help to better understand the underlying diffusion problem.