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

(ProQuest: ... denotes formulae omitted.)

INTRODUCTION

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. Results from this study suggest the de facto standardization process to be more intriguing than previously shown in the literature. For instance, while ample literature suggests that the selection of a de facto standard involves more than simply a technical choice as technological superiority can sometimes be offset by other factors such as network effects (Anderson & Tushman, 1990; Barnett, 1990); this study concludes that technological superiority is indeed a major factor in choosing de facto standards. Moreover, while a number of studies emphasize the significance of an open architecture (Bonaccorsi & Rossi, 2003; Garud, Jain, & Kumaraswamy, 2002; Garud & Kumaraswamy, 1993), this study suggests that the effects of such a strategy on standardization may be contingent on the nature of competition. Based on these findings, this research makes two contributions to the literature. First, this study provides an examination of the effectiveness of three important technological factors related to firms' strategy in light of the moderating effects of competitive conditions. …

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