Network Economy
Encyclopedia
The network economy is the emerging economic order within the information society
. The name stems from a key attribute - products and services are created and value is added through social networks operating on large or global scales. This is in sharp contrast to industrial-era economies, in which ownership of physical or intellectual property
stems from its development by a single enterprise. Business models for capturing ownership rights for value embedded in products and services created by social networks are being explored.
rights.
From a transitional point of view, Malone and Laubacher (1998) indicate that the Information Revolution has changed the nature of business activity. Because information can be shared instantly and inexpensively on a global scale, the value of centralized decision making and expensive bureaucracies is greatly diminished. Brand (1999) points out that commerce is being accelerated by the digital and network revolutions and that the role of commerce is to both exploit and absorb these shocks. Some effort must focus on developing new infrastructure while other activity will emphasize governance and evolving culture. Rifkin (2000) notes that real estate has become a business burden in network-based markets.
From an infrastructure
perspective, Tapscott (1996) compares information networks of the new economy to highways and the power grid of the industrial economy. He suggests that no country can succeed without state-of-the-art electronic infrastructure. Schwartz (1999) writes that in the future, large companies will manage their purchasing, invoicing, document exchange, and logistics through global networks that connect a billion computing devices.
At global scales, Tapscott (1996) indicates that companies can provide 24-hour service as customer requests are transferred from one time zone to another without customers being aware that the work is being done on the other side of the world. Boyett and Boyett (2001) point out that the larger the network, the greater its value and desirability. In a networked economy, success begets more success.
Kelly (1998) states that in a network economy, value is created and shared by all members of a network rather than by individual companies and that economies of scale stem from the size of the network - not the enterprise. Similarly, because value flows from connectivity, Boyett and Boyett (2001) point out that an open system
is preferable to a closed system
because the former typically have more nodes. They also indicate that such networks are blurring the boundaries between a company and its environment.
A network economy raises important issues with respect to intellectual property. Shapiro and Varian (1999) explain that once a first copy of information has been produced, producing additional copies costs virtually nothing. Rifkin (2000) proposes that as markets make way for networks, ownership is being replaced by access rights because ownership becomes increasingly marginal to business success and economic progress.
Information society
The aim of the information society is to gain competitive advantage internationally through using IT in a creative and productive way. An information society is a society in which the creation, distribution, diffusion, use, integration and manipulation of information is a significant economic,...
. The name stems from a key attribute - products and services are created and value is added through social networks operating on large or global scales. This is in sharp contrast to industrial-era economies, in which ownership of physical or intellectual property
Intellectual property
Intellectual property is a term referring to a number of distinct types of creations of the mind for which a set of exclusive rights are recognized—and the corresponding fields of law...
stems from its development by a single enterprise. Business models for capturing ownership rights for value embedded in products and services created by social networks are being explored.
Network economy
The network economy may be viewed from a number of perspectives: transition from the industrial economy, digital and information infrastructure, global scale, value networks, and intellectual propertyIntellectual property
Intellectual property is a term referring to a number of distinct types of creations of the mind for which a set of exclusive rights are recognized—and the corresponding fields of law...
rights.
From a transitional point of view, Malone and Laubacher (1998) indicate that the Information Revolution has changed the nature of business activity. Because information can be shared instantly and inexpensively on a global scale, the value of centralized decision making and expensive bureaucracies is greatly diminished. Brand (1999) points out that commerce is being accelerated by the digital and network revolutions and that the role of commerce is to both exploit and absorb these shocks. Some effort must focus on developing new infrastructure while other activity will emphasize governance and evolving culture. Rifkin (2000) notes that real estate has become a business burden in network-based markets.
From an infrastructure
Infrastructure
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...
perspective, Tapscott (1996) compares information networks of the new economy to highways and the power grid of the industrial economy. He suggests that no country can succeed without state-of-the-art electronic infrastructure. Schwartz (1999) writes that in the future, large companies will manage their purchasing, invoicing, document exchange, and logistics through global networks that connect a billion computing devices.
At global scales, Tapscott (1996) indicates that companies can provide 24-hour service as customer requests are transferred from one time zone to another without customers being aware that the work is being done on the other side of the world. Boyett and Boyett (2001) point out that the larger the network, the greater its value and desirability. In a networked economy, success begets more success.
Kelly (1998) states that in a network economy, value is created and shared by all members of a network rather than by individual companies and that economies of scale stem from the size of the network - not the enterprise. Similarly, because value flows from connectivity, Boyett and Boyett (2001) point out that an open system
Open system
Open system may refer to:*Open system , one of a class of computers and associated software that provides some combination of interoperability, portability and open software standards, particularly Unix and Unix-like systems...
is preferable to a closed system
Closed system
-In physics:In thermodynamics, a closed system can exchange energy , but not matter, with its surroundings.In contrast, an isolated system cannot exchange any of heat, work, or matter with the surroundings, while an open system can exchange all of heat, work and matter.For a simple system, with...
because the former typically have more nodes. They also indicate that such networks are blurring the boundaries between a company and its environment.
A network economy raises important issues with respect to intellectual property. Shapiro and Varian (1999) explain that once a first copy of information has been produced, producing additional copies costs virtually nothing. Rifkin (2000) proposes that as markets make way for networks, ownership is being replaced by access rights because ownership becomes increasingly marginal to business success and economic progress.
See also
- Digital revolutionDigital RevolutionThe Digital Revolution is the change from analog mechanical and electronic technology to digital technology that has taken place since c. 1980 and continues to the present day. Implicitly, the term also refers to the sweeping changes brought about by digital computing and communication technology...
- Digital economyDigital economyA digital economy is an economy based on electronic goods and services produced by an electronic business and traded through electronic commerce...
- Electronic businessElectronic businessElectronic business, commonly referred to as "eBusiness" or "e-business", or an internet business, may be defined as the application of information and communication technologies in support of all the activities of business...
- Electronic commerceElectronic commerceElectronic commerce, commonly known as e-commerce, eCommerce or e-comm, refers to the buying and selling of products or services over electronic systems such as the Internet and other computer networks. However, the term may refer to more than just buying and selling products online...
- Information economyInformation economyInformation economy is a term that characterizes an economy with an increased emphasis on informational activities and information industry.The vagueness of the term has three major sources...
- Information highway
- Information marketInformation marketAlthough information has been bought and sold since ancient times, the idea of an information marketplace is relatively recent. The nature of such markets is still evolving, which complicates development of sustainable business models...
- Information Revolution
- information societyInformation societyThe aim of the information society is to gain competitive advantage internationally through using IT in a creative and productive way. An information society is a society in which the creation, distribution, diffusion, use, integration and manipulation of information is a significant economic,...
- Intellectual propertyIntellectual propertyIntellectual property is a term referring to a number of distinct types of creations of the mind for which a set of exclusive rights are recognized—and the corresponding fields of law...
- Internet economyInternet EconomyThe internet economy conducts business through markets whose infrastructure is based on the Internet and World-Wide Web. An Internet economy differs from a traditional economy in a number of ways, including: communication, market segmentation, distribution costs, and price.- Internet economy...
- Knowledge economyKnowledge economyThe knowledge economy is a term that refers either to an economy of knowledge focused on the production and management of knowledge in the frame of economic constraints, or to a knowledge-based economy. In the second meaning, more frequently used, it refers to the use of knowledge technologies to...
- Knowledge marketKnowledge marketA knowledge market is a mechanism for distributing knowledge resources. There are two views on knowledge and how knowledge markets can function. One view uses a legal construct of intellectual property to make knowledge a typical scarce resource, so the traditional commodity market mechanism can be...
- Social networking
- Social peer-to-peer processes
- Virtual economyVirtual economyA virtual economy is an emergent economy existing in a virtual persistent world, usually exchanging virtual goods in the context of an Internet game...