National styles in the setting of global standards the relationship between firms' standardization strategies and national origin

1、national styles in the setting of global standards: the relationship between firms standardization strategies and national originaija leiponenintroductiontechnical standards are ubiquitous in industries with network technologies. standards enable interoperability without widely accepted standards, t

2、rains, telephones, televisions, and many other modern technologies would not work. standards tend to lock markets into technological trajectories for a significant period of time, because of substantial fixed investments in network equipment and technological processes, not to mention the sunk costs

3、 of developing standards in the first place. as a result, technical standards may substantially shape markets: the distribution or concentration of intellectual property rights and technological capabilities may determine the long-term nature and intensity of competition in an industry.the emergence

4、 of technical standards is a complex process where social, political, and commercial interactions among interested parties influence the unique outcome. economic research has identified two polar standardization processes: market driven standardization (de facto) and politically driven standardizati

5、on (de jure). however, in recent years, “hybrid” or committee-based standardization processes which emphasize cooperation among companies as opposed to government agencies have been dominant in many industries (farrell and saloner 1988). wireless telecommunications is a recent example of this mode o

6、f standardization (funk and methe 2001; bekkers, duysters, and verspagen 2002). however, standardization processes and their effects on markets are not yet well understood. the paper by cowhey et al. in this volume illustrates the complexities involved in international standardization cooperation an

7、d the possible implications for market emergence. the current chapter focuses on firm behavior. the goal is to shed light on firms standardization strategies, where private actors play a central role but need to cooperate with their rivals in developing technical standards. as technical standards in

8、 wireless telecommunication no longer are set by government agencies or left for markets to decide, standardization has become a central part of firm strategy. one anecdotal indicator attesting to this is that many leading technology companies have hired specialized vice president level standardizat

9、ion managers in recent years. in contrast, strategic management research has not investigated standardization as an integral part of innovation and technology strategies. the book by shapiro and varian (1999) remains one of the very few references in this area. their analysis builds on theoretical i

10、ndustrial economics and focuses on the choices related to compatibility between technologies and control of intellectual property. these choices turn on the characteristics of the competitive field whether there are many or few suppliers and the nature of the innovation whether it is an incremental

11、or a radical improvement. however, there remains a lot of room to enhance our understanding of firms standardization strategies, in particular, regarding how firms organize standards development activities.despite the global reach of wireless telecommunication technologies and standards, firms from

12、three continents, north america, europe, and asia, appear to behave differently in their standardization activities. as discussed by peter cowhey, jonathan aronson, and john richards in chapter 13 and zysman and newman in the introduction, path dependencies created by national policies, traditions,

13、and cooperative linkages continue to matter in this age of global competition. one particular source of national differences may be the institutional legacies and the degree to which they complement international standardization institutions (mattli and büthe 2003). whereas continental european

14、 companies have a longer tradition of international (within-europe) coordination and cross-border cooperation, telecommunications authorities in the united states have followed a much more liberal market oriented and technology neutral approach emphasizing competition among potential technologies (t

15、ate 2001). asian countries, japan in particular, have tended to choose technical standards through a more centralized process whereby the government in cooperation with major companies imposes standards on the industry (tate 2001, funk 1998). these national systems of standardization have generated

16、incentives for firms to develop certain types of capabilities and cooperative arrangements, which tend to persist over time. national origins may thus continue to have a bearing on global firms strategies towards standard-setting.this paper examines whether american, european, and asian firms standa

17、rdization strategies differ with respect to cooperative orientation and activity in international organizations. these differences are of interest to the companies operating in this area, as they see how firms are positioned in the standardization networks and how this might matter for their perform

18、ance. even though most of the companies analyzed in this study are large and operate internationally, their cooperative networks are path-dependent in that partners and modes of cooperation persist over time. patterns of cooperation may become institutionalized in the sense that their evolution lags

19、 behind economic and competitive changes in the environment (cook 1977; gulati 1995). the paper also aims to contribute to management and economic research on standard-setting by developing a typology of standardization strategies illustrated through the descriptive data analysis of firms engaging i

20、n these different strategies. finally, policymakers interested in standardization processes and outcomes should find the analysis illuminating as it presents new evidence of the kinds of firms that are central, and thus powerful, in standard-setting networks. organization of firms standardization ac

21、tivities is studied here using newly compiled data of firms participating in the third generation partnership project (3gpp), an international standards development organization formed to coordinate standard-setting related to the universal mobile telecommunications system (umts) standard. 3gpp is t

22、he successor of the special mobile group of the european telecommunications standards institute (etsi). while the origins of this organization are thus in europe, it currently has worldwide presence both in terms of membership and adoption of the technical specifications created. the paper is organi

23、zed as follows. in the next section i discuss conceptual issues related to firms standardization behavior. the third and fourth sections present descriptive analyses using a dataset on firms standardization activities within the 3gpp, their memberships in other standards development organizations, a

24、nd participation in international technology alliances. the final section summarizes the results and discusses their implications for managers, policymakers, and future research in this area.why do firms cooperate in technical standardization?industrial dynamicsthe economic industrial organization t

25、heory suggests that it is very important for firms in network technology markets to gain a sufficient market share for products and technology platforms. this is because of demand-side network externalities (katz and shapiro 1985) and supply-side scale economies (klepper 1996, simons 2003), both of

26、which generate first mover advantages. network externalities speed up the convergence of markets towards one technology, because once a technology has obtained a critical mass of users, it is increasingly advantageous for subsequent adopters to buy products based on this platform: the benefits of th

27、e product itself are compounded by the size of the network that users can access by subscribing to this technology. as a result, the market share of the winning technology can grow initially at an exponential rate (arthur 1989). strategically, it is then essential for firms to be among the first to

28、enter new network markets and to obtain a critical market share. otherwise they may be forced to switch to the competing technology or exit the markets altogether. in practice, however, network externalities rarely operate quite as strongly as suggested by this simplified model. other factors, such

29、as political differences between regional or national markets, may support multiple technological standards. similarly, if users have very strong preferences for the different features or qualities of the competing technologies, the market may remain fragmented. for example, apple macintosh computer

30、s have retained their niche market share around 2% despite the network externalities associated with the “ibm-compatible” personal computers. macintosh computers have been seen as particularly suitable for certain applications such as graphic design, and they also have benefited from a very loyal us

31、er base. nevertheless, network dynamics make it very important for firms to enter the markets early and quickly rally support for their technological solution from suppliers and clients. various cooperative strategies discussed this chapter can facilitate these goals.the telecommunications sector is

32、 characterized by even stronger network effects than the computer industry because communication technologies have absolutely no value without the capacity to exchange messages. reliability of telecommunications is also an important consideration in governments control and security functions, and co

33、nsequently, public authorities have traditionally played a central role in telecommunication standardization (schmidt and werle 1998). telecommunication standards have usually been developed in international organizations such as itu (international telecommunications union) and regional organization

34、s, for example etsi (european telecommunication standards institute) and arib (association for radio industries and businesses, japan). gradually during the late 1980s and over the 1990s the roles of government authorities in these organizations have been reduced, while commercial firms have gained

35、in importance.currently wireless telecommunications companies are relatively free to develop technologies and promote them as standards. they can remain outside of any standardization cooperation and try to employ market forces to gain market acceptance. this was the approach of the equipment firm q

36、ualcomm and the operator nextel in second generation networks during the 1990s. alternatively, companies can participate in formal standardization processes, where successful equipment providers technologies will become incorporated into the standard. governance of standards development in wireless

37、telecommunicationsthe evolution of wireless telecommunication technologies and markets continues to depend heavily on successful development of technical standards. the first generation of analog systems (“1g”) was developed on national and sub-regional bases. as a result, multiple incompatible tech

38、nologies were adopted within europe, north america, and asia. in most countries, these technological choices were made by the government authorities together with domestic telecommunications operators and equipment suppliers. the second generation technologies (“2g”) introduced digital transmission

39、of information. now, governments and companies both realized the potential benefits from transnational cooperation. after much competitive jockeying on the part of the commercial parties, european governments adopted the gsm technology that was jointly standardized through the european telecommunica

40、tions standards institute, etsi. north america and asia continued to have multiple competing technologies. in addition to gsm and tdma that are closely related technologies, a newcomer to the industry called qualcomm inc. introduced a radically different technology based on code division multiple ac

41、cess (cdma) air interface. however, a late entry and subsequent smaller scale economies prevented qualcomm and its allies from becoming a more significant contender in the global race for market share in the 2g wireless telecommunications systems. as information and communication technologies contin

42、ue to converge, the next step in the technological competition is to enable better data exchange rates over wireless communication systems. this is the goal of third generation (“3g”) systems. again, despite the initial negotiations, the world markets ended up divided into multiple competing technol

43、ogies. european telecom operators adopted the universal mobile telecommunications system (umts) that builds on existing gsm networks but uses the wideband cdma air interface (wcdma), while north american and asian markets have adopted either umts or cdma2000 based systems. cdma2000 builds on the exi

44、sting cdma networks. the race to launch networks and sell these systems to yet undecided operators around the world created extremely high stakes in the standardization game. indeed, a striking organizational phenomenon took place in wireless telecommunications in the late 1990s: equipment providers

45、 appeared to be founding new industry fora, associations, or alliances almost weekly. organization theories did not seem to have an explanation for such behavior. why were so many different cooperative organizations needed to coordinate one technical system, albeit a complex one? moreover, these coo

46、perative organizations were often founded by a core group of the same leading companies in the industry, and thus it was not a question of different subgroups within the industry organizing to compete (axelrod et al. 1995). in addition to public and semi-public industry associations, firms formed pr

47、ivate strategic alliances and cooperated in open international standards bodies. rosenkopf and tushman (1998) suggest that during the early stages of the technology life cycle when the technology is in ferment, companies manage technological and market uncertainties by engaging in interfirm networks

48、 and alliances. as a result, cooperation constellations are reconfigured under these turbulent conditions. empirical observation suggests that cooperative organizations may also be used to “market” new solutions and applications to other industry players. also, these kinds of ad hoc cooperative orga

49、nizations may enable faster development of technical specifications than is possible in public and bureaucratic standards development organizations. finally, a more cynical interpretation for the industry association activity is that leading firms use associations to hide a tacit collusion that is i

50、ntended to solidify the technological trajectory to their advantage, without including smaller firms or firms with different technological positions in the decision-making. industry fora can thus be used to lock in the cooperation agenda and key technical solutions to the founding firms technologies

51、 before other companies are allowed to participate in public, open standardization processes.whichever the underlying reason for industry associations, coordination among firms in an industry based on network technologies is critical to achieve interoperability. this coordination can assume many dif

52、ferent forms of governance and operate through several distinct cooperative organizations simultaneously. table 1 displays an attempt to list the possible organizational forms for standard-setting. the extremes of letting the markets or the government select technical solutions have all but disappea

53、red from wireless telecommunications, but almost all of the middle ground forms of coordinationassociations, alliances, forums, and negotiationhave been used in the standardization of the third-generation systems. indeed, these intermediate forms of committee-based standardization have largely taken

54、 over previous de jure and de facto processes. this perhaps vindicates farrells and saloners (1988) analysis that committees are more efficient than pure markets in standardizing complex technologies, particularly if market processes are allowed to interact with more political committee processes.ta

55、ble 1 about hereit is an interesting question whether these different cooperative arrangements are complements or substitutes. transaction cost economic logic would suggest that firms match organization form to the characteristics of the transaction, in this case, standard setting activity. in this

56、scenario, there is no reason to observe firms engaging in multiple different types of organizations to achieve one goal. alternatively, standard setting can be viewed as a political game of influence rather than an economic problem of maximizing efficiency. in this perspective, firms might use the d

57、ifferent channels of influence to promote their own preferred technical solutions toward industry adoption. as a result, firms might use many different forms of cooperation to achieve one single goal, and we would observe strong positive correlations among the arrangements.the process of cooperative

58、 standards developmentstandards development includes both aspects that align rival firms interests and those that foster conflicts. for instance, market growth and formation of cooperative relationships are generally beneficial to all agents in the market. interests are in conflict when firms compet

59、e to incorporate their own technology in the standard and to obtain information about rivals strategies while attempting to protect information about their own strategies and technologies from leaking to their rivals. balancing mutual and conflicting interests cooperation and competition is therefore one of the key strategic goals in standardization.depending on the firms business strategy, either cooperation or competition may be emphasized in standardization strategy. the american technology suppl