Asymmetric Interaction in Competitive Internet Technology Diffusion: Implications for the Competition Between Local and Multinational Online Vendors

This paper explores the diffusion of competitive Internet technology products in the context of competition between local and multinational corporations as well as how the diffusive interactions between technologies affect their dominance in electronic markets. Drawing on existing theories of innovation diffusion, and competitive dynamics, the authors adopted a new diffusion model that incorporates the influence of one technology’s adoption on the diffusion of other technology. The authors then validated the model using longitudinal field data of the two pairs of Internet technology products in Chinese electronic markets. The findings of this investigation suggest that Internet product diffusion can be better predicted by a competitive dynamic model than by an independent-diffusion-process model. Further, results indicate that the diffusive interaction between local and multinational corporations’ technologies can be a two-way asymmetric interaction. Such a pattern supports a conclusion of significant second-mover advantage for local online vendors in fast-growing emerging markets. The authors also examine the policy implications of these results, specifically with respect to how asymmetric interaction effects can help domestic online vendors gain second-mover advantage facing the entry of multinational corporations.