Network Effects and Latecomers’ Born-Global Strategy: Social Network Effect vs. Ecosystem Effect

Management scholars have examined the persistent heterogeneity of firm performance from the first mover advantage perspective. In the same vein, first mover advantage has also been highlighted in early internationalization (or born-global) literature. However, the focus of much of this work has been on the heterogeneity of firm characteristics and capabilities and their impacts on internationalization. We present a demand-side view of early internationalization from network effects and demand heterogeneity perspective. It is well known that when the network effect is strong, it is hard for latecomers to survive. With a formal simulation model, we suggest that latecomer firms may overcome this disadvantage by leveraging market demand heterogeneity across countries when social network effect (direct network effect) is stronger than ecosystem effect (indirect network effect).