Academic journal article Business Renaissance Quarterly

Network Pattern and Linkage Strength in Standard Competition

Academic journal article Business Renaissance Quarterly

Network Pattern and Linkage Strength in Standard Competition

Article excerpt

Abstract

To battle against alternative technologies, companies have created alliance networks to diffuse their own technological standards. Such networks incorporate firms, connected by strong and weak ties, in both the focal industry and the related industries. After reviewing prior literature on alliance networks, this paper argues that network linkage strength interacts with network centrality, internal competition, and interdependence to shape industrial standards. Strong connections should be created among select members within a network to achieve success in standard competition. The paper concludes with theoretical and practical implications.

Introduction

IBM PC was not the fastest personal computer. VHS format was not the sharpest videocassette reproduction. And Westinghouse's AC system was not the most efficient power system. Despite their relative technology inferiority, however, these innovations have all become dominant designs, i.e. "a single architecture that establishes dominance in a product class" (Anderson and Tushman, 1990). Obviously, technology superiority is not the only determinant of industrial standards; actions of individuals, organizations, and networks of organizations also affect the emergence of a dominant design (Utterback, 1994; Oshri and Weeber, 2006). Especially, networks of organizations play a critical role in shaping industry standards (Leiponen, 2008). Business practitioners suggest that firms should be able to combine technological capabilities with the ability of forming strategic alliances to influence the development of industrial standards (Schilling, 1999).

In the last several decades, with the increasing significance of technological changes, the relationships between strategic alliances and technological innovation have attracted much academic attention. Interfirm alliances have been acknowledged as a mechanism to facilitate innovation, and consequently to enhance performance (e.g. Kotabe and Swan, 1995; Deeds and Hill, 1996; Stuart, 2000; Lavie, Lechner, and Singh, 2007). In effect, when a market is still in the process of selecting a dominant design, firms may aggressively seek partners, including suppliers, distributors, customers, and competitors, who would adopt their innovations. Such collaboration has gone beyond two-party partnerships and become networks of companies linked together for a common purpose (Gomes-Casseres, 1994). Prior studies, however, have mainly focused on conventional bilateral alliances from a firm's perspective, and largely ignored the group-based nature of standard competition. Despite the popular notion of alliance formation (e.g., Anderson and Tushman, 1990; Schilling, 1999), little is known about the pattern of network linkages in the cycle of technological changes (Riley, 2007).

This study intends to explore how firms use network linkages to set a dominant design. To battle against alternative standards, companies have created alliance networks to diffuse their own designs. Such networks incorporate firms, connected by contractual or equity relations, in both the focal industry and the related industries. After reviewing prior literature on alliance networks, this paper argues that network linkage strength interacts with network centrality, internal competition, and interdependence to shape industrial standards. Strong connections should be created among select members of a design group to achieve success. The paper concludes with suggestions for future studies.

Theory Development

The evolution of each new technology begins with technological discontinuity when fundamental innovations emerge with advantages over prior technologies in terms of costs, performance, and quality (Anderson and Tushman, 1990; Tushman and Rosenkopf, 1992). Technological discontinuity leads to a period of experimentation as companies put effort to diffuse alternative new innovations. Anderson and Tushman (1990) termed this period as an "era of ferment", and Utterback (1994) called it "the fluid phase". …

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