Academic journal article Journal of Small Business Strategy

Strategic Maneuvering of Technological Factors and Emergence of De Facto Standards

Academic journal article Journal of Small Business Strategy

Strategic Maneuvering of Technological Factors and Emergence of De Facto Standards

Article excerpt


The emergence of a de facto standard in a product class depends on technological, competitive, and market factors. The question is whether or not a firm can strategically manipulate various factors to help determine the winner. To address this question, three factors, technological superiority, openness, and compatibility, are examined with regard to their influence on the emergence of de facto standards. Hypotheses are tested with an analysis of 78 historical cases in 39 market categories. Results indicate that in setting de facto standards, technological superiority is uniformly important, suggesting the logic of technological determinism. Moreover, results also suggest that the influence of technological openness may be contingent on the nature of competition. Thus, strategic managers may need to incorporate a contingency perspective into the selection of an appropriate strategy.

Keywords: competitive strategy, de facto standard, network externalities, open architecture

(ProQuest: ... denotes formulae omitted.)


De facto standards are those standards that achieve dominant position via economic or social factors, as opposed to de jure standards which are the mandate of an authority. Anderson and Tushman (1990: 613) define a de facto standard, or in their term dominant design, as "a single architecture that establishes dominance in a product class." Researchers point out that once de facto standards emerge, they regulate the fundamental technological rules and specifications used for the design of all related products in a product class (Besen & Farrell, 1994; Kristiansen, 1998; Srinivasan, Lilien, & Rangaswamt, 2006). Researchers suggest that the emergence of a de facto standard not only reflects the technical and socioeconomic evolution of the industry (Abernathy & Utterback, 1978; Tushman & Anderson, 1986; Utterback & Abernathy, 1975), but is also due to the strategic maneuvering of firms (Cusumano, Mylonadis, & Rosenbloom, 1992; Katz & Shapiro, 1994; Srinivasan et al., 2006). Since selecting the proper design and strategy is closely tied to firms' success, and ultimately their survival, (Christensen, Suarez, & Utterback, 1998; Suarez & Utterback, 1995; Tegarden, Hatfield, & Echols, 1999), understanding the factors driving the emergence of de facto standards is of critical importance to all firms (large and small) that exist within the ecosystem.

Indeed, various factors influence the emergence of a de facto standard in a given product class (market category). For instance, Pioneer's Laser Disk (LD) was able to defeat JVC's Video Disc (VHD) in the Japanese karaoke market because Pioneer's non-contact technology was critical to users such as restaurants and bars where dust and smoke tended to damage the VHD. However, Anderson and Tushman (1990) point out that the emergence of a de facto standard is not simply a function of technological superiority. Rather, a combination of product and technological strategic decisions intervene in the path toward the setting of such standards. For example, JVC established a de facto standard by actively licensing and cross licensing its VHS technologies to its rivals and suppliers of complementary products (Cusumano et al., 1992); Sun Microsystems established its workstation as a de facto standard via an open source strategy (Garud & Kumaraswamy, 1993). Thus, firms' decisions regarding their technological strategy may influence the emergence of de facto standards. However, understanding in this area is incomplete.

This paper attempts to shed light on how firms can strategically maneuver technological factors to help shape de facto standards. Specifically, using 78 cases from 39 Japanese and U.S. market categories in which firms competed to create de facto standards, this study examined how three of these factors - technological superiority, technological openness, and technological compatibility - may have influenced the emergence of such standards. …

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