Cooperative Technology Management for Consensus Standardization: Dram Standards and IPRS

Arai, Masashi, International Journal of Business Strategy

1. INTRODUCTION

Many scholars (Cargill, C. F., 1989; Jakobs, K., 2000) have studied standardization, but their main interest is 'de-facto standardization' for competitive advantage in global competition. As a result, standardization is considered an effective means of technology management for competitive advantage. In fact, the importance of standardization increased for companies in the 21st century because the ICT (Information and Communication Technology) revolution and modularity led to global networks and request compatibilities. Recently, however, it has become difficult for a company to have its own technologies set a global standard. Three reasons for this are as follows: first, the change in the global business environment--shortening product life cycles and intensifying standardization competition; second, the flattening of the world market, with developing countries' R&D ability increasing and catching up with that of developed countries; and, finally, excessive patents leading to the tragedy of the anti-commons.

In recent years, we can observe a number of cases of consensus standardization, especially in global high-tech industries. Consensus standardization is the process by which all the companies competing in an industry agree to industry standards. This process requires that companies cooperatively discuss a standard in consortia or similar organizations with global membership, in order to avoid counter-productive competition among their technology candidates for a standard, infringing on others' patents and delaying time-to-market while embroiled in standardization battles, particularly in this era of shortening product life-cycles.

However, consensus standards have not been studied in sufficient detail. This paper reveals how consensus standardization affects companies' technology management.

2. LITERATURE REVIEW

The traditional multinational companies (MNCs) expand business overseas with superior technologies. Technological advantage is an important factor in multinationalization because technologies are critically important resources for companies (Vernon, R. [1966, 1971], Kindleberger, C.P. [1969], Caves, R.E. [1971], Hymer, S.H. [1976], Casson, M. [2000]). The earlier studies defined competitive advantage in terms of differentiation or cost reduction (Vernon, R. [1966, 1971], Kindleberger, C.P. [1969], Caves, R.E. [1971], Hymer, S.H. [1976], Porter, M. E. [1983, 1986]), and in that context, companies' technology strategy affects product differentiation and cost reduction.

3. TWO NEW ASPECTS OF TECHNOLOGY MANAGEMENT

Two tactics of technology management lead to competitive advantage. One is the research and development (R&D) that results in the invention and development of new technologies. The other is patenting the technologies to protect the companies' rights. According to prior studies, companies used to be able to do R&D freely and control their patents independently for competitive advantage. In recent studies, however, companies, especially those in high-tech industries, have difficulty in gaining competitive advantage alone because of two new aspects of technology management: competition and cooperation (Takeda, 2001, 2006, and 2008). The earlier studies did not sufficiently consider technology cooperation between companies, although they did mention that companies might achieve competitive advantage through independent technology management.

An environment composed of competition and cooperation is often demonstrated in high-tech industries because they require compatibility in networks, modules and many other technologies. Especially in high-tech industries, technologies are more complex, and products contain diverse technologies. Nevertheless, because each company has generated many patents of their technologies every year for the past few decades, different versions of the same technologies are dispersed among many companies in the same industry. Thus, competitors must cooperate on standards for their technologies if they hope to create a functioning product with a short time-to-market. In this business model, companies compete against each other, but their technologies are partially common. Consequently, as high-tech industries are very technology-oriented, companies are compelled to differentiate their technologies against those of competitors on the non-standardized features of their products.

4. THE TRAGEDY OF THE ANTI-COMMONS IN HIGH-TECH INDUSTRIES

Patents are one of the intellectual property rights that do not change in substance for a long period. They have always been a popular resource for companies (Table 1). However, companies became more focused on patents after 1985 …

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Publication information: Article title: Cooperative Technology Management for Consensus Standardization: Dram Standards and IPRS. Contributors: Arai, Masashi - Author. Journal title: International Journal of Business Strategy. Volume: 10. Issue: 1 Publication date: January 2010. Page number: 16+. © 2008 International Academy of Business and Economics. COPYRIGHT 2010 Gale Group.

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