Shane Greenstein

We examine thirty years of computer industry market structure. Our analysis explains the persistence of dominant computer firms, their recent decline, and the changing success of competitive entry. It emphasizes the importance of technological competition between computer ‘platforms’, not firms. This aspect of competition has changed little over time. Two things did change. Young platforms serving newly founded segments eventually challenged established platforms across segment boundaries through a process of indirect entry. Vertically disintegrated platforms have led to divided technical leadership in important segments. The result is an industry with far more technological competition.

In this paper we examine the development of the microcomputer market in the early 1980s. CP/M, a widely‐adopted operating system, was orphaned by the user and the development communities. A new operating system, DOS, and a new hardware platform, the IBM PC, became the predominant industry standard. We examine the statistical relationship between data that reflects hardware and software sales for the competing platforms. We conclude that the economic processes underlying the development of DOS differed from those underlying CP/M and that many of these differences related to the role of software development.