''Lock-in'' vs. ''critical masses'' - industrial change under network externalities

Where increasing returns to adoption play a role in the diffusion of a new technology, technological ''lock-in'' is now often claimed to occur. However, this result, and the modeling approach that produces it, are problematic. Further innovations could never have a chance of disseminating, if ''lock-in'' had occurred in the diffusion process of earlier innovations. Yet, in reality, industrial change does not come to a halt. The paper offers a discussion of the apparent paradox. From an alternative modeling approach conditions are derived under which a newly introduced technology can successfully disseminate in the market despite existing network externalities. (C) 1997 Elsevier Science B.V.