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What is a Network Economy?

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  • Written By: Donn Saylor
  • Edited By: John Allen
  • Last Modified Date: 29 September 2016
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Network economy is the economic order within the framework of the technological information society. Unlike economies inspired by the Industrial Revolution, the network economy utilizes technological advances like the information market and social networking platforms to establish the value of goods and services. There are several chief aspects of the network economy: its inherent structural differences from industrial economies, the role of the digital revolution, value networks, and intellectual property rights.

One element of the information revolution was the creation of new forms of economy and technology in the post-Industrial Revolution years. Combined with changes in cultural and social styles, the information revolution initiated a change in how business was conducted. The importance of business administration and boardroom decision-making was lessened by consumers' ability to share knowledge on a large scale via the information highway. This caused a significant shift in business transactions; the advent of electronic commerce and a largely digital economy restructured how many businesses operate. Where once the value of a product or service was set solely by the company, now, through the sharing of information by digital means, it was now fundamentally determined by consumers.

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Value networks were revolutionized by the onset of the internet economy. Large-scale information sharing through social networks could make or break the success of a product or service. With more power in the hands of consumers, businesses also found they were being held more accountable for their actions. At the same time, however, they saw financial benefits of this new network economy. Suddenly, sales were not limited to certain demographic areas but were able to reach all corners of the globe.

There are complicated issues of intellectual property rights associated with a mainly virtual economy. Intellectual property laws grant owners exclusive rights to assets deemed intangible, such as works of art. In the context of the network economy, a business is charged with protecting its intellectual property by ensuring that competitors do not steal its ideas, products, or pricing structures — a very real possibility in the information age.

Despite the onslaught of changes brought about the network economy and the popularity of electronic business, basic economic laws remain unchanged. Creating quality products, setting value-maximizing pricing structures, utilizing positive consumer criticism, and maintaining customer-focused business models are timeless economic laws. With or without technology, these facts help maintain and grow any economic configuration, and, as evidenced by the network economy, can take the field in exciting new directions.

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donasmrs
Post 3

@fBoyle-- The network economy can also be a group of people who buy the same good or who invest in the production of a good. The economy is made up of many networks or groups of people who are interested in the same product or service. Think of an online shopping site for example. The people who buy products from that site, write reviews, leave feedback and ask questions all make up that network. This is what the new economy networks look like. A network can be small or big but they're all very influential.

bear78
Post 2

@fBoyle-- The network economy is made possible by the information economy.

You can think of the information economy as data found on the internet. For example, product information and customer reviews are all part of the information economy. The network economy takes advantage of this data to determine the value of goods and services. The market actually does this on its own because technology and easy access to information makes it clear which goods and services customers want and what they're willing to pay for them.

When you search for flights online and pick the best ticket at the best price, you are helping the network economy determine the value of plane tickets.

So everything is intertwined. You can't have an economic network without information and information without technology. They all depend on one another.

fBoyle
Post 1

What is the difference between a network economy and an information economy?

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