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Journal of Evolutionary Economics

, Volume 25, Issue 5, pp 875–899 | Cite as

“…then came Cisco, and the rest is history”: a ‘history friendly’ model of the Local Area Networking industry

  • Roberto FontanaEmail author
  • Lorenzo Zirulia
Regular Article

Abstract

We study the role that switching costs, compatibility, and mergers and acquisitions play in influencing the evolution of a multi-market industry. By looking at the case of the Local Area Networking industry, we propose a ‘history friendly model’ to replicate its evolution during the 1990s. Our model explains how a firm can start from a dominant position in one of the existing markets and exploit switching costs and compatibility to enter a new market. Mergers and acquisitions also play an important role as the new market is pioneered by a start-up, which is soon acquired by the dominant incumbent. As a result of the acquisition, the acquiring firm becomes the leader also in the new market.

Keywords

Simulation History friendly models Switching costs Compatibility 

JEL Classification

D22 G34 O30 L10 L63 

Notes

Acknowledgments

we have greatly benefited from the comments of the editor and two anonymous referees. Shane Greenstein, the late Steven Klepper, William Lazonick, and Franco Malerba commented on a very early version of this paper. Preliminary versions were also presented at the 2006 Schumpeter Society Conference in Nice, at the October 2008 DIME workshop on ‘Demand, Innovation, and Industrial Dynamics’ in Milano, and at a seminar at CIRCLE, Lund University in December 2012. The usual disclaimers apply.

Supplementary material

191_2015_422_MOESM1_ESM.docx (26 kb)
ESM 1 (DOCX 26 kb)

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Copyright information

© Springer-Verlag Berlin Heidelberg 2015

Authors and Affiliations

  1. 1.Department of Economics & ManagementUniversity of PaviaPaviaItaly
  2. 2.CRIOS - Bocconi UniversityMilanItaly
  3. 3.Department of EconomicsUniversity of BolognaBolognaItaly
  4. 4.RCEARiminiItaly

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