| One of the most discussed standards competitions has been the contest between the operating systems of Microsoft and Apple Computer. Microsoft now dominates this market, and some attribute its success to “network effects”—the idea that, by gaining early market share, Microsoft's operating system became more attractive to new adopters, whose actions reinforced its attractiveness and created a “virtuous circle” toward its acceptance as a standard. As Microsoft's market share has grown, proponents of network effects have predicted Apple's demise. Apple Computer, however, survives and begs this question: how can such theory be reconciled with experience?; I argue that a major factor in Apple's survival has been the emergence of gateways for computer networks. Gateways are devices that allow otherwise incompatible systems to work together. By incorporating gateways into a simple model of technology adoption, I show how their existence can negate the effects of a large network like Microsoft's. |
