Abstract
The market growth of content and data services in the mobile telecoms industry entails the development of complex industry networks or 'ecosystems'. This research stems from the emerging Location-Based Services (LBS) sector, which has suffered the slow-start dynamics that often belie optimistic forecasts of new technologies. An exploratory and generic industry-level model is developed using the system dynamics simulation modelling approach to explain the start-up problem. This serves as a dynamic theory for the emerging LBS industry market where service diffusion is based on the growth of the installed base of an embedded product. Supply-demand interactions occur through complementary bandwagon effects in which benefits accrue from services that complement the main product. Econometric estimation is compared with system dynamics calibration to test a range of diffusion models on historic data, revealing some evidence of bandwagon effects. The model is proposed as a generic structure for market growth in mobile data services in general and as a tentative theory to explain the phenomenon of technology 'hype' cycles. The model leads to broad policy proposals on how to alleviate the start-up problem. Launching products without attending to service quality can mean that consumers become disillusioned whereas ensuring a high quality user experience requires a collaborative and long-term view of ecosystem development. This implies that major players such as handset manufacturers or mobile operators must play a central co-ordinating role. Validation of exploratory models of emerging markets is based more in terms of plausibility and usefulness, given the lack of historic data. A validation framework in the three dimensions of model content, process and outcome provides a holistic and semi-quantitative profile of the utility of generic models. A validation profile is proposed that can be used in a formative role to clarify model purpose and aid planning in model-based interventions.