IDEAS home Printed from https://ideas.repec.org/a/eee/tefoso/v81y2014icp309-320.html
   My bibliography  Save this article

Standard wars, tied standards, and network externality induced path dependence in the ICT sector

Author

Listed:
  • Heinrich, Torsten

Abstract

It is well-established that technological standards are subject to network externalities. These lead to lock-in situations with asymmetric (oligopolistic or monopolistic) industry structure and occasionally to persisting shortcomings in the current industry standard despite technically feasible alternatives. Taking the ICT sector as an example this paper discusses the special case of inter-sectoral tying of standards, interconnected network effects of connected standards in different sectors, and the resulting impact on the industry structure. Qualitative and quantitative evidences suggest that this phenomenon is very common in the ICT sector, possibly also in other sectors. The problem is formally analyzed as a replicator model and as an agent-based simulation model. It is found that tying reinforces lock-ins and the resulting effects.

Suggested Citation

  • Heinrich, Torsten, 2014. "Standard wars, tied standards, and network externality induced path dependence in the ICT sector," Technological Forecasting and Social Change, Elsevier, vol. 81(C), pages 309-320.
    • Handle: RePEc:eee:tefoso:v:81:y:2014:i:c:p:309-320
    DOI: 10.1016/j.techfore.2013.04.015
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0040162513000917
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.techfore.2013.04.015?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Gerald Silverberg & Bart Verspagen, 2007. "Self-organization of R&D search in complex technology spaces," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 2(2), pages 211-229, December.
    3. Philip Arestis & John S.L. McCombie & Roger Vickerman (ed.), 2006. "Growth and Economic Development," Books, Edward Elgar Publishing, number 3463.
    4. Nicholas Economides, 2007. "Economics of the Internet," Working Papers 07-1, New York University, Leonard N. Stern School of Business, Department of Economics.
    5. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-131, March.
    6. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-337, May.
    7. Thomas Le Texier & Maher Gordah, 2011. "Peer-to-peer Networks and Complementary Goods: The Impact of Openness and Innovation on Profitable Piracy," Economic Analysis, Institute of Economic Sciences, vol. 44(1-2), pages 15-37.
    8. Wolfram Elsner & Gero Hocker & Henning Schwardt, 2010. "Simplistic vs. Complex Organization: Markets, Hierarchies, and Networks in an Organizational Triangle — A Simple Heuristic to Analyze Real-World Organizational Forms —," Journal of Economic Issues, Taylor & Francis Journals, vol. 44(1), pages 1-30.
    9. Farrell, Joseph & Saloner, Garth, 1986. "Installed Base and Compatibility: Innovation, Product Preannouncements, and Predation," American Economic Review, American Economic Association, vol. 76(5), pages 940-955, December.
    10. Shy, Oz, 2002. "A quick-and-easy method for estimating switching costs," International Journal of Industrial Organization, Elsevier, vol. 20(1), pages 71-87, January.
    11. Stango Victor, 2004. "The Economics of Standards Wars," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-19, March.
    12. Jay Pil Choi, 2004. "Tying and innovation: A dynamic analysis of tying arrangements," Economic Journal, Royal Economic Society, vol. 114(492), pages 83-101, January.
    13. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    14. Kauffman, Stuart & Lobo, Jose & Macready, William G., 2000. "Optimal search on a technology landscape," Journal of Economic Behavior & Organization, Elsevier, vol. 43(2), pages 141-166, October.
    15. Dosi, Giovanni & Ermoliev, Yuri & Kaniovski, Yuri, 1994. "Generalized urn schemes and technological dynamics," Journal of Mathematical Economics, Elsevier, vol. 23(1), pages 1-19, January.
    16. Eocman Lee & Jeho Lee & Jongseok Lee, 2006. "Reconsideration of the Winner-Take-All Hypothesis: Complex Networks and Local Bias," Management Science, INFORMS, vol. 52(12), pages 1838-1848, December.
    17. Thomas Le Texier & Maher Gordah, 2011. "Peer‐to‐peer networks and complementary goods: The impact of openness and innovation on profitable piracy," Post-Print halshs-00631558, HAL.
    18. Kretschmer, Tobias, 2004. "Upgrading and niche usage of PC operating systems," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1155-1182, November.
    19. Swann, G. M. Peter, 2002. "The functional form of network effects," Information Economics and Policy, Elsevier, vol. 14(3), pages 417-429, September.
    20. Nelson, Richard R & Winter, Sidney G, 1974. "Neoclassical vs. Evolutionary Theories of Economic Growth: Critique and Prospectus," Economic Journal, Royal Economic Society, vol. 84(336), pages 886-905, December.
    21. David, Paul A. & Bunn, Julie Ann, 1988. "The economics of gateway technologies and network evolution: Lessons from electricity supply history," Information Economics and Policy, Elsevier, vol. 3(2), pages 165-202.
    22. Brian Arthur, W. & Ermoliev, Yu. M. & Kaniovski, Yu. M., 1987. "Path-dependent processes and the emergence of macro-structure," European Journal of Operational Research, Elsevier, vol. 30(3), pages 294-303, June.
    23. Boldrin Michele & Levine David K., 2009. "Does Intellectual Monopoly Help Innovation?," Review of Law & Economics, De Gruyter, vol. 5(3), pages 991-1024, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Torsten Heinrich, 2018. "Network Externalities and Compatibility Among Standards: A Replicator Dynamics and Simulation Analysis," Computational Economics, Springer;Society for Computational Economics, vol. 52(3), pages 809-837, October.
    2. Tsekouras, Kostas & Chatzistamoulou, Nikos & Kounetas, Kostas & Broadstock, David C., 2016. "Spillovers, path dependence and the productive performance of European transportation sectors in the presence of technology heterogeneity," Technological Forecasting and Social Change, Elsevier, vol. 102(C), pages 261-274.
    3. Claudius Gräbner & Philipp Heimberger & Jakob Kapeller & Bernhard Schütz, 2018. "Structural Change in Times of Increasing Openness," wiiw Working Papers 143, The Vienna Institute for International Economic Studies, wiiw.
    4. Claudius Gräbner & Philipp Heimberger & Jakob Kapeller & Bernhard Schütz, 2020. "Structural change in times of increasing openness: assessing path dependency in European economic integration," Journal of Evolutionary Economics, Springer, vol. 30(5), pages 1467-1495, November.
    5. Heinrich, Torsten & Dai, Shuanping, 2016. "Diversity of firm sizes, complexity, and industry structure in the Chinese economy," Structural Change and Economic Dynamics, Elsevier, vol. 37(C), pages 90-106.
    6. Heinrich, Torsten, 2015. "Growth Cycles, Network Effects, and Intersectoral Dependence: An Agent-Based Model and Simulation Analysis," MPRA Paper 79575, University Library of Munich, Germany, revised 08 Jun 2017.
    7. Vitezić Vanja & Srhoj Stjepan & Perić Marko, 2018. "Investigating Industry Dynamics in a Recessionary Transition Economy," South East European Journal of Economics and Business, Sciendo, vol. 13(1), pages 43-67, June.
    8. Heinrich, Torsten, 2016. "The Narrow and the Broad Approach to Evolutionary Modeling in Economics," MPRA Paper 75797, University Library of Munich, Germany.
    9. Lee, Won Sang & Sohn, So Young, 2018. "Effects of standardization on the evolution of information and communications technology," Technological Forecasting and Social Change, Elsevier, vol. 132(C), pages 308-317.
    10. Heinrich, Torsten, 2015. "A Replicator Dynamic and Simulation Analysis of Network Externalities and Compatibility Among Standards," MPRA Paper 67198, University Library of Munich, Germany.
    11. Torsten Heinrich, 2018. "A Discontinuity Model of Technological Change: Catastrophe Theory and Network Structure," Computational Economics, Springer;Society for Computational Economics, vol. 51(3), pages 407-425, March.
    12. Juin-Ming Tsai & Shiu-Wan Hung & Guan-Ting Lin, 2022. "Continued usage of smart wearable devices (SWDs): cross-level analysis of gamification and network externality," Electronic Markets, Springer;IIM University of St. Gallen, vol. 32(3), pages 1661-1676, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Heinrich, Torsten, 2015. "A Replicator Dynamic and Simulation Analysis of Network Externalities and Compatibility Among Standards," MPRA Paper 67198, University Library of Munich, Germany.
    2. Torsten Heinrich, 2018. "Network Externalities and Compatibility Among Standards: A Replicator Dynamics and Simulation Analysis," Computational Economics, Springer;Society for Computational Economics, vol. 52(3), pages 809-837, October.
    3. Heinrich, Torsten, 2016. "The Narrow and the Broad Approach to Evolutionary Modeling in Economics," MPRA Paper 75797, University Library of Munich, Germany.
    4. Heli Koski & Tobias Kretschmer, 2004. "Survey on Competing in Network Industries: Firm Strategies, Market Outcomes, and Policy Implications," Journal of Industry, Competition and Trade, Springer, vol. 4(1), pages 5-31, March.
    5. Tatsuhiro Shichijo & Emiko Fukuda, 2019. "A dynamic game analysis of Internet services with network externalities," Theory and Decision, Springer, vol. 86(3), pages 361-388, May.
    6. Liangjie Zhao & Wenqi Duan, 2014. "Simulating the Evolution of Market Shares: The Effects of Customer Learning and Local Network Externalities," Computational Economics, Springer;Society for Computational Economics, vol. 43(1), pages 53-70, January.
    7. Kornish, Laura J., 2006. "Technology choice and timing with positive network effects," European Journal of Operational Research, Elsevier, vol. 173(1), pages 268-282, August.
    8. Kenneth Arrow, 2000. "Increasing returns: historiographic issues and path dependence," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 7(2), pages 171-180.
    9. Marechal, Kevin, 2007. "The economics of climate change and the change of climate in economics," Energy Policy, Elsevier, vol. 35(10), pages 5181-5194, October.
    10. Leonhard Dobusch & Elke Schüßler, 2013. "Theorizing path dependence: a review of positive feedback mechanisms in technology markets, regional clusters, and organizations," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 22(3), pages 617-647, June.
    11. Schoder, Detlef, 2000. "Forecasting the success of telecommunication services in the presence of network effects," Information Economics and Policy, Elsevier, vol. 12(2), pages 181-200, June.
    12. Torsten Heinrich, 2018. "A Discontinuity Model of Technological Change: Catastrophe Theory and Network Structure," Computational Economics, Springer;Society for Computational Economics, vol. 51(3), pages 407-425, March.
    13. Beomjin Choi & T. S. Raghu & Ajay Vinzé & Kevin J. Dooley, 2019. "Effectiveness of standards consortia: Social network perspectives," Information Systems Frontiers, Springer, vol. 21(2), pages 405-416, April.
    14. Vialle, Pierre & Song, Junjie & Zhang, Jian, 2012. "Competing with dominant global standards in a catching-up context. The case of mobile standards in China," Telecommunications Policy, Elsevier, vol. 36(10), pages 832-846.
    15. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
    16. Luigi Marengo & Paolo Zeppini, 2016. "The arrival of the new," Journal of Evolutionary Economics, Springer, vol. 26(1), pages 171-194, March.
    17. Geerten Van de Kaa & Daniel Scholten & Jafar Rezaei & Christine Milchram, 2017. "The Battle between Battery and Fuel Cell Powered Electric Vehicles: A BWM Approach," Energies, MDPI, vol. 10(11), pages 1-13, October.
    18. Takahashi, Takuma & Namiki, Fujio, 2003. "Three attempts at "de-Wintelization": Japan's TRON project, the US government's suits against Wintel, and the entry of Java and Linux," Research Policy, Elsevier, vol. 32(9), pages 1589-1606, October.
    19. Chia‐Hui Chen & Junichiro Ishida, 2021. "A War of Attrition with Experimenting Players," Journal of Industrial Economics, Wiley Blackwell, vol. 69(2), pages 239-269, June.
    20. Mangematin, V. & Callon, M., 1995. "Technological competition, strategies of the firms and the choice of the first users: the case of road guidance technologies," Research Policy, Elsevier, vol. 24(3), pages 441-458, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:tefoso:v:81:y:2014:i:c:p:309-320. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.sciencedirect.com/science/journal/00401625 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.