Twinning Networks: Co-Evolution and Competition of System Component Technologies in the Local Area Network Industry

This work analyses the evolution of the Local Area Network industry in terms of the interaction of technological and economic dimensions over time. It focuses in particular on two suppliers of LAN systems: the access technology industry and the internetworking industry. Two elements driving the evolution are identified, 1) cross-substitution among the components when costs are reduced or performance improved,and 2) the need to preserve the compatibility with existing components or technologies. The effects of these mechanisms on the dynamics of entry and exit of firms in both industries are analysed by using the Organisational Ecology approach. We find that the effects on the dynamic are different depending on the presence or absence of innovation. These mechanisms may ensure a matching between the two industries and a virtuous cycle of growth in absence of innovation. Nevertheless, when an innovation occurs in one of the two industries and the carrying capacity of the system is altered, the 'match' is disrupted and it may be difficult to re-establish a matching position, thus the virtuous cycle may turn into a 'vicious one'. An interpretation of the reasons for this mismatching is given by using the concept of 'lineage process' to describe the application of a technology in new domains and by stressing the role that elements different from adaptation and availability of resource may play in delaying the process.