Late Entrant Strategies in Technological Ecologies

Abstract This paper examines the way in which Microsoft, a late entrant in the browser market, was able to exploit linkages between the complementary elements forming a technological ecology in order to overcome the lock-in advantages initially enjoyed by Netscape. The case study forces us to critically appraise three related research questions. First, what strategies can be employed by late market entrants to overcome the lock-in advantages enjoyed by dominant incumbents? Second, are cooperative alliances preferable to the in-house, cross-product optimization of interrelated technologies? Third, is there a tendency for unbundling over the course of the industry life cycle? A coupled Polya Urn model is developed in order to clarify the strategies employed by Microsoft and Netscape in the browser wars. The findings highlight the gains from leveraging installed user bases across interrelated product markets, with cross-product optimization being a key source of strategic advantage for firms competing in technological ecologies.