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

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Author Info

  • 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.

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File URL: ftp://ftp.unibocconi.it/pub/RePEc/cri/papers/WP171BrusoniFontana.pdf
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Bibliographic Info

Paper provided by KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy in its series KITeS Working Papers with number 171.

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Length: 47 pages
Date of creation: Jul 2005
Date of revision: Jul 2005
Handle: RePEc:cri:cespri:wp171

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Related research

Keywords: Entry; Modularity; LAN Equipment;

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Cited by:
  1. Roberto Fontana & Lionel Nesta, 2006. "Product entry in a fast growing industry: the LAN switch market," Journal of Evolutionary Economics, Springer, Springer, vol. 16(1), pages 45-64, April.
  2. Frenken, Koen, 2006. "A fitness landscape approach to technological complexity, modularity, and vertical disintegration," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 17(3), pages 288-305, September.

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