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Modularity as an Entry Strategy: The invasion of new niches in the LAN equipment industry

Author

Listed:
  • Stefano Brusoni

    (CESPRI and CRORA, Università Bocconi, Milano and Silvio Tronchetti- Provera Foundation, Italy)

  • Roberto Fontana

    (CESPRI, Università Bocconi, Milano and Department of Economics, University of Pavia, Italy)

Abstract

This paper focuses on niche entry patterns in the LAN equipment industry in the 1990s. We analyze an original data-set of LAN equipment consisting of more than 1,000 hubs and switches marketed between 1990 and 1999. Modularity emerged as a design strategy that supported incumbent firms’ efforts to enter new product niches in the hub segment. However, after the emergence of switches as an alternative to hubs, coupled with the introduction of a new standard, incumbents relying on a modular hub strategy were overtaken by a new comer (Cisco). Moreover, the fastest followers were incumbents that had not previously relied on modular hub architectures. Our interpretation is as follows: modularity offers advantages of speed when changes occur within established boundaries. However, it also generates a ‘tunnel effect’ that prevents firms from developing products based on different problem-solving strategies. Such changes are more easily introduced by firms that do not rely on tightly-defined modular design rules.

Suggested Citation

  • Stefano Brusoni & Roberto Fontana, 2005. "Modularity as an Entry Strategy: The invasion of new niches in the LAN equipment industry," KITeS Working Papers 171, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jul 2005.
    • Handle: RePEc:cri:cespri:wp171
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    Citations

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    Cited by:

    1. Roberto Fontana & Lionel Nesta, 2007. "Product entry in a fast growing industry: The LAN switch market," Springer Books, in: Uwe Cantner & Franco Malerba (ed.), Innovation, Industrial Dynamics and Structural Transformation, pages 87-106, Springer.
    2. Frenken, Koen, 2006. "A fitness landscape approach to technological complexity, modularity, and vertical disintegration," Structural Change and Economic Dynamics, Elsevier, vol. 17(3), pages 288-305, September.
    3. Kuan, Jennifer & West, Joel, 2023. "Interfaces, modularity and ecosystem emergence: How DARPA modularized the semiconductor ecosystem," Research Policy, Elsevier, vol. 52(8).

    More about this item

    Keywords

    Entry; Modularity; LAN Equipment;
    All these keywords.

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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