On the Strategic Use of Product Modularity for Market Entry: Theory and Empirical Evidence

We model the conditions under which firms should enter the market with multiple modular products instead of a single product. Product modularity enables firms to broaden their portfolios and increase their chances of investing in the “right” technologies early in a technology cycle, a time of high uncertainty. Entry with integral products instead occurs later in the technology cycle. We test the model’s predictions on a sample of entrants from the Local Area Network (LAN) industry during the 1990s.