Chapter 6

1. Rohlfs (1974) was the first to define and discuss network externalities. For a survey of recent work on this, see Katz and Shapiro (1994).

2. See Kenneth J. Arrow (1962) and Paul Romer (1990). It is worth noting that both Arrow and Romer limited their discussion of nonrival and nonexcludable goods to technological innovations, as is the tradition in economics. When the concept of innovation is redefined as value innovation, which is more relevant at the microeconomic firm level, the importance of the nonrival and nonexcludable notion is even more striking. This is because technological innovation often has a greater excludable component due to the possibility and relative ease of obtaining patent protection.

3. See Ford Motor Company (1924) and William J. Abernathy and Kenneth Wayne (1974).