What is a Network Economy?

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.

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.