The Business of Internetworking: Standards, Start-Ups, and Network Effects

Abstract

Historical accounts of the Internet's origins tend to emphasize U.S. government investment and university-based researchers. In contrast, this article introduces actors who have been overlooked: the entrepreneurs and private firms that developed standards, evaluated competing standards, educated consumers about the value of new products, and built products to sell. Start-up companies such as 3Com and Cisco Systems succeeded because they met rapidly rising demand from users, particularly those in large organizations, who were connecting computers into networks and networks into internetworks. We consider a relatively brief yet dynamic period, from the late 1960s to the late 1980s, when regulators attacked incumbent American firms, entrepreneurs flourished in new market niches, and engineers set industry standards for networking and internetworking. As a consequence, their combined efforts forged new processes and institutions for so-called open standards that, in turn, created the conditions favorable for the “network effects” that sustained the formative years of the digital economy.