Academic journal article Innovation: Organization & Management

Coalition Building Dynamics in Video Format Wars

Academic journal article Innovation: Organization & Management

Coalition Building Dynamics in Video Format Wars

Article excerpt

Companies such as Sony, JVC, Matsushita and Toshiba are closely linked through a series of relationships that are both cooperative and competitive, described as 'coopetition' (Nalebuff& Brandenburger 1996). Moreover, the relationship between these companies is reinforced by a need for standardization. Although standardization may involve voluntary cooperation between players concerned with fulfilling consumer expectations, increasing competitiveness, or maintaining interoperability, standardization processes are also the result of standards wars (Shapiro & Varian 1999). It is not uncommon for apparently contradictory rationales to motivate standardization processes. Standardization results not only from voluntary cooperation between some parties in the standardization process, but also from intense competition between them.

Mixed coalitions of rival firms from various business sectors form, constituting business ecosystems (Moore 1993, 1996; Iansiti & Levien 2004). These business ecosystems are characterized by cooperation and competition between their members. In these alliances between competitors (alliances which make up specific coalitions) the underlying idea is to avoid a greater threat, i.e., that other business ecosystems emerge.

While most standardization efforts have focused on understanding the economic basis for standards (Arthur 1994; Shapiro & Varian 1999; Suarez 2004) and standards implementation processes (Greenstein 1992; Weiss 1993; Lyytinen & King 2006), few have examined coalition building dynamics and the way players enter and exit. Theoretical (Foray 1994; Axelrod et al. 1995; Lukach et al. 2007) and empirical [e.g., Funk (2009) mobile phone industry; Cortese et al. (2009) IFRS in mining industries; Leiponen (2008) wireless telecommunications; Chiesa et al. (2002) multimedia sector] studies have examined the role played by coalitions in a standard's success. This paper follows along these lines and proposes to examine coalition dynamics in the video storage format industry. We analyze the reasons why players in one or more sectors of industry join and withdraw from coalitions. This will help understand why some coalitions succeed and others fail to impose their standards.

The video storage format industry is a particularly fertile field for analyzing standards in that the impact of various factors characterizing the standardization process can be studied. Furthermore, this changing industry makes it possible to analyze players' strategic choices during various technological competitions paying particular attention to coalition building.

This paper is organized as follows. In the section 'Theoretical perspectives' we demonstrate the importance of strategic alliances in business ecosystem wars. Our methodology is described in 'Method'. In the section 'Coalition dynamics in video storage format ecosystems' we study coalition dynamics in video storage format business ecosystems examining how players enter and exit coalitions. We discuss our results in 'Results, discussion, and implications' and present our conclusions in 'Conclusion'.

THEORETICAL PERSPECTIVES

In this section we present our theoretical and conceptual framework, highlighting alliance building motivations in standardization processes, particularly regarding direct competitors and complementary goods suppliers. Business ecosystems, where various relationships rise and fall, are formed in these alliances.

Business ecosystems

Our study's starting point is the notion of business ecosystems (Moore 1993, 1996; Lado et al. 1997; Bengtsson & Kock 1999; Iansiti & Levien 2004; Chesbrough 2007). A business ecosystem is a 'heterogeneous coalition of companies from different sectors forming a community based on strategic interest or values networked around a leader capable of imposing or communicating its marketing vision or technological standard' (Torrès-Blay 2000). This coalition of diverse companies will focalize around a leader or a group of leaders stimulating business ecosystem stakeholder dynamics in order to dominate the market. …

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