‘…then came Cisco and the rest is history’. A history friendly model of the Local Area networking industry

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.