NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Modularity and the Evolution of the Internet

Timothy Simcoe


This chapter is a preliminary draft unless otherwise noted. It may not have been subjected to the formal review process of the NBER. This page will be updated as the chapter is revised.

Chapter in forthcoming NBER book Economic Analysis of the Digital Economy, Avi Goldfarb, Shane Greenstein, and Catherine Tucker, editors
Conference held June 6-7, 2013
Forthcoming from University of Chicago Press

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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