concept

sunk costs

Facts (14)

Sources

Business ecosystems as a way to activate lock-in in business models link.springer.com Springer Mar 28, 2025 14 facts

claimCurrent business model theory identifies mechanisms for managers to leverage lock-in, including sunk costs, direct and indirect network effects, and data network effects.

referenceBusiness model theory, as conceptualized by Amit and Zott (2001) and documented by Climent et al. (2024), identifies brand loyalty, sunk costs, direct network effects, indirect network effects, and data network effects as mechanisms for achieving lock-in.

claimNespresso's business ecosystem creates lock-in for participating firms and consumers through dedicated investments, sunk costs, and the exclusion of other coffee producers and machine makers from the ecosystem.

referenceSchmalensee published the article 'Sunk costs and market structure: A review article' in The Journal of Industrial Economics in 1992.

claimFacebook utilizes lock-in mechanisms including sunk costs (user registration, app installation, and interface familiarization) and indirect network effects, where the presence of more content producers attracts more content consumers, which in turn attracts more producers.

referenceCurrent business model theory identifies five primary methods to establish lock-in: loyalty, sunk costs, direct network effects, indirect network effects, and data network effects.

claimFirms can create self-reinforcing competitive advantages that discourage imitation by implementing complementarity, network effects, and sunk costs within an ecosystem.

claimA pioneer firm can defend against imitators by activating lock-in mechanisms within its business model architecture, specifically through sunk costs, direct network effects, indirect network effects, or data network effects.

claimNespresso maintains a competitive advantage in the coffee business ecosystem by utilizing a model based on novelty and efficiency, which creates a lock-in effect for consumers through brand trust, awareness, and sunk costs.

claimAmazon utilizes brand recognition, brand loyalty, sunk costs, direct network effects, dominant indirect network effects, and data network effects to activate lock-in themes.

claimBusiness model theory identifies five primary lock-in mechanisms to protect pioneering firms against imitation: brand loyalty, sunk costs, direct network effects, indirect network effects, and data network effects.

claimMechanisms that contribute to the activation of a lock-in business model theme include sunk costs (Schmalensee, 1992), loyalty (Malhotra & Kubowicz Malhotra, 2013), direct network effects, indirect network effects (Clements, 2004), and data network effects emerging from machine learning technologies (Gregory et al., 2021; Climent et al., 2024; Haftor et al., 2024).

claimAmazon, its suppliers, and its customers create a lock-in effect through mutual investments that lead to sunk costs and indirect network effects, making it costly and risky for competitors like Walmart Plus to entice these actors to migrate.

claimBusiness model theory identifies six mechanisms for activating lock-in: brand loyalty, sunk costs, direct network effects, indirect network effects, data network effects, and the business ecosystem.