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Thomas J. Buchte, Communications Associate
USC Marshall Center for Global Innovation
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ROLE OF QUALITY: USC MARSHALL CENTER FOR GLOBAL INNOVATION REVEALS QUALITY WINS OVER NETWORK EFFECTS
April 29, 2009

LOS ANGELES, CA, April 29, 2009. The USC Marshall Center for Global Innovation (CGI), an academic center of excellence on global innovation at the University of Southern California, formally announced a new study that reveals the critical drivers of success in high-tech markets. The study found that quality wins, despite network effects.
Many high tech markets are characterized by network effects, where the value of a product increases with the number of users (e.g., word processors or auction sites). In such markets, users may buy a product because their friends and co-workers use it rather than the intrinsic quality of the product. Scholars have been concerned that in such markets, one brand may dominate the market; also, consumers might converge on such an inferior brand because it is first, rather than it is the best quality. However, no one has explicitly tested the relative importance of quality versus such network effects.
Researchers at the Center, Gerard Tellis, Eden Yin and Rakesh Niraj, collected and analyzed data on the evolution of rival brands in 19 high tech markets. The authors found that even when network effects are present, consumers respond promptly to superior quality. As a result, market share leadership changes often, switches in share leadership closely follow switches in quality leadership, and the best-quality brands, not the ones that are first to enter, dominate the market.


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