Question

Using an example of innovation, discuss “Network effects” and how they help in understanding the success of an innovation in the market place.

Answer 1

Innovation and network effects are intimate to each other. Innovation can be a successful if network effects are strong and predominant.

Network effects refers to the value of product that rises when there more users of it. Internet is an example of network effects. Internet is valuable if more people tend to use it. Thus development of internet is an innovation and its success will depend on number of internet users.