NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Modularity and the Evolution of the Internet

Timothy Simcoe

Chapter in NBER book Economic Analysis of the Digital Economy (2015), Avi Goldfarb, Shane Greenstein, and Catherine Tucker, editors (p. 21 - 47)
Conference held June 6-7, 2013
Published in April 2015 by University of Chicago Press
© 2015 by the National Bureau of Economic Research

This chapter offers an empirical case study of the Internet architecture from an economic viewpoint. Data collected from the two main Internet standard setting organizations, which are the Internet Engineering Task Force (IETF) and the World Wide Web Consortium (W3C), demonstrate the modularity of the Internet architecture, as well as the specialized division of labor that produces it. An analysis of citations to Internet standards provides evidence on the diffusion and commercial application of new Internet protocols. The author ties these observations together by arguing that modularity helps the Internet, and perhaps digital technology more broadly, to avoid long-run decreasing returns to investments in innovation by facilitating low-cost adaptation of a shared general-purpose technology to the demands of heterogeneous applications.

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This paper was revised on May 20, 2014

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