Firms' strategies and network externalities: empirical evidence from the browser war.

Abstract

This paper analyzes adoption decisions of Internet browser software with the focus on firms’ strategies and market consequences, and the existence of network externalities. Since the early 1995, Microsoft employed many strategies in order to diminish the popularity of Netscape’s Navigator and Communicator. Microsoft’s Internet Explorer finally won the war in 1999, but this led to the antitrust lawsuit. Based on the GVU WWW User Survey data in 1997 and 1998, the results from logit models show that network externalities existed in Navigator and Communicator although they were diminishing through time. The success of Internet Explorer was driven by Microsoft’s free and bundling strategies, not by the product itself nor by network externalities.