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Product entry in a fast growing industry: the LAN switch market

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Author Info

  • Roberto Fontana

    ()
    (CESPRI, Bocconi University, Milan)

  • Lionel Nesta

    ()
    (SPRU, University of Sussex)

Abstract

We provide empirical evidence on market positioning by firms, in terms of market niche, distance from technological frontier and dispersion. We focus on the switch industry, a sub-market of the Local Area Network industry, in the nineties. Market positioning is a function of the type of firms (incumbents versus entrants), market size and contestability and firm competencies. We find that incumbents specialise in high-end segments and disperse their product in a larger spectrum of the market. Instead, entrants focus on specific market niches. Market size, market contestability and firm competencies are also important determinants of product location.

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Bibliographic Info

Paper provided by SPRU - Science and Technology Policy Research, University of Sussex in its series SPRU Working Paper Series with number 126.

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Length: 36 pages
Date of creation: 10 Oct 2004
Date of revision:
Handle: RePEc:sru:ssewps:126

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Keywords: switch industry; markets; competition; firm capabilities; product entry;

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References

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  1. Joseph Farrell and Carl Shapiro., 1988. "Dynamic Competition with Switching Costs," Economics Working Papers 8865, University of California at Berkeley.
  2. Bhatt, Swati, 1987. "Strategic Product Choice in Differentiated Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 36(2), pages 207-16, December.
  3. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, vol. 43(2), pages 217-35, June.
  4. Breschi, Stefano & Lissoni, Francesco & Malerba, Franco, 2003. "Knowledge-relatedness in firm technological diversification," Research Policy, Elsevier, vol. 32(1), pages 69-87, January.
  5. Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 3-13, January.
  6. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 515-39, October.
  7. 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.
  8. Andrew A. King & Christopher L. Tucci, 2002. "Incumbent Entry into New Market Niches: The Role of Experience and Managerial Choice in the Creation of Dynamic Capabilities," Management Science, INFORMS, vol. 48(2), pages 171-186, February.
  9. Brander, James A & Eaton, Jonathan, 1984. "Product Line Rivalry," American Economic Review, American Economic Association, vol. 74(3), pages 323-34, June.
  10. Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-26, June.
  11. Eaton, B Curtis & Lipsey, Richard G, 1979. "The Theory of Market Pre-emption: The Persistence of Excess Capacity and Monopoly in Growing Spatial Markets," Economica, London School of Economics and Political Science, vol. 46(182), pages 149-58, May.
  12. Teece, David J. & Rumelt, Richard & Dosi, Giovanni & Winter, Sidney, 1994. "Understanding corporate coherence : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 23(1), pages 1-30, January.
  13. Bonanno, Giacomo, 1987. "Location Choice, Product Proliferation and Entry Deterrence," Review of Economic Studies, Wiley Blackwell, vol. 54(1), pages 37-45, January.
  14. Barry L. Bayus & William P. Putsis, Jr., 1999. "Product Proliferation: An Empirical Analysis of Product Line Determinants and Market Outcomes," Marketing Science, INFORMS, vol. 18(2), pages 137-153.
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Cited by:
  1. Lionel Nesta & Roberto Fontana, 2007. "Entry, Innovation and Exit from LAN Switch Industry," Sciences Po publications 2007-02, Sciences Po.
  2. Roberto Fontana & Lionel Nesta, 2009. "Product Innovation and Survival in a High-Tech Industry," Review of Industrial Organization, Springer, vol. 34(4), pages 287-306, June.
  3. Roberto Fontana & Lionel Nesta, 2007. "Entry, Innovation and Exit. Evidence from the LAN switch Industry," Documents de Travail de l'OFCE 2007-02, Observatoire Francais des Conjonctures Economiques (OFCE).
  4. Roberto Fontana & Alessandro Nuvolari & Bart Verspagen, 2008. "Mapping Technological Trajectories as Patent Citation Networks. An application to Data Communication Standards," SPRU Working Paper Series 166, SPRU - Science and Technology Policy Research, University of Sussex.
  5. Lionel Nesta & Roberto Fontana, 2007. "Product Innovation and Survival in a High-Tech Industry," Sciences Po publications 2007-30, Sciences Po.

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