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Determinants of Innovation and Competition of Component System Technologies in the Local Area Network Industry

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Author Info
Roberto Fontana

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Abstract

This work is concerned with the determinants of innovations and competition of technologies in the case of the Local Area Network industry. It focuses in particular on two suppliers of LAN components: the access technology industry and the internetworking industry. Two elements driving the diffusion are identified, 1) reduction of technological uncertainty, and 2) the extent of network externalities. The effects of these mechanisms on the process of diffusion of technologies into new application domains are analysed through the dynamics of entry and exit of firms in both industries. We find that the effects on the dynamic are different depending on the kind of innovation. The above mechanisms may guarantee a match between suppliers and adopters and foster the innovation diffusion. Nevertheless, it may occur that when an innovation occurs in one of the two industries and the ‘match’ is disrupted it needs time to be re-established, and innovation diffusion may slow down. We speculate on the determinants of these findings and their limitations.

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File URL: ftp://ftp.unibocconi.it/pub/RePEc/cri/papers/wp117.pdf
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Publisher Info
Paper provided by CESPRI, Centre for Research on Innovation and Internationalisation, Universita' Bocconi, Milano, Italy in its series CESPRI Working Papers with number 117.

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Length: 32 pages
Date of creation: Sep 2000
Date of revision: Sep 2000
Handle: RePEc:cri:cespri:wp117

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Related research
Keywords: Innovation; Compatibility; Excess momentum; Excess inertia; Local area network;

Find related papers by JEL classification:
O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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  1. David, Paul A. & Bunn, Julie Ann, 1988. "The economics of gateway technologies and network evolution: Lessons from electricity supply history," Information Economics and Policy, Elsevier, vol. 3(2), pages 165-202. [Downloadable!] (restricted)
  2. Joseph Farrell & Garth Saloner, 1985. "Standardization, Compatibility, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 70-83, Spring. [Downloadable!] (restricted)
    Other versions:
  3. Joseph Farrell & Garth Saloner, 1988. "Coordination through Committees and Markets," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 235-252, Summer.
    Other versions:
  4. Carmen Matutes & Pierre Regibeau, 1988. ""Mix and Match": Product Compatibility without Network Externalities," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 221-234, Summer. [Downloadable!] (restricted)
  5. Levinthal, Daniel A, 1998. "The Slow Pace of Rapid Technological Change: Gradualism and Punctuation in Technological Change," Industrial and Corporate Change, Oxford University Press, vol. 7(2), pages 217-47, June.
  6. Jay Pil Choi, 1994. "Irreversible Choice of Uncertain Technologies with Network Externalities," RAND Journal of Economics, The RAND Corporation, vol. 25(3), pages 382-401, Autumn. [Downloadable!] (restricted)
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  7. Rebecca Henderson, 1993. "Underinvestment and Incompetence as Responses to Radical Innovation: Evidence from the Photolithographic Alignment Equipment Industry," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 248-270, Summer. [Downloadable!] (restricted)
  8. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June. [Downloadable!] (restricted)
  9. Clark, Kim B., 1985. "The interaction of design hierarchies and market concepts in technological evolution," Research Policy, Elsevier, vol. 14(5), pages 235-251, October. [Downloadable!] (restricted)
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