Competition through Institutional Form: the Case of Cluster Tool Standards
AbstractIndustrial economists tend to think of competition as occurring between atomic units called "firms." Theorists of organization tend to think about the choice among various kinds of organizational structures -- what Langlois and Robertson (1995) call "business institutions." But few have thought about the choice of business institution as a competitive weapon. This essay will examine, and attempt to learn from, a case in which choice of organizational form is in fact a major element of competition. Cluster tools, a type of equipment for manufacturing semiconductors, are becoming increasingly important as manufacturers attempt to pack more and more circuits on a chip. Within the U. S. industry, competition for these devices is divided between a large vertically integrated firm, Applied Materials, that designs and builds largely internally according to its own specifications and a large fringe of smaller, more specialized competitors. These latter have responded to the competition from Applied by creating a common set of technical interface standards, called the Modular Equipment Standards Committee (MESC) standards. Rather than a battle of the standards, the current situation might best be thought of as a battle of alternative development paths: the closed system of Applied Materials, with its significant internal economies of scale and scope, and the open modular system of the competitive fringe, driven by external economies of standardization. At this point, the forces favoring the integrated development path are more-or-less evenly balanced against the forces favoring the path of technical standardization. I analyze these forces in terms of the tradeoff between the benefits of systemic innovation and systemic coordination on the one hand and the benefits of external economies of scope and modular innovation on the other. Although standards have so far kept the competitive fringe in the ballgame, modularity in the industry may ultimately take a different, and somewhat more familiar, form, as some of the larger firms adhering to the standards become broadly capable systems integrators who outsource manufacturing to specialized suppliers of subsystems.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2004-10.
Length: 41 pages
Date of creation: May 2004
Date of revision:
Note: Paper for a conference on Standards and Public Policy, Federal Reserve Bank of Chicago, May 13-14, 2004
Contact details of provider:
Postal: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063
Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-06-27 (All new papers)
- NEP-COM-2004-06-27 (Industrial Competition)
- NEP-EVO-2004-06-02 (Evolutionary Economics)
- NEP-INO-2004-06-27 (Innovation)
- NEP-LAB-2004-06-27 (Labour Economics)
- NEP-REG-2004-06-27 (Regulation)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Vincent Frigant & Damien Talbot, 2005. "Technological Determinism and Modularity: Lessons from a Comparison between Aircraft and Auto Industries in Europe," Industry and Innovation, Taylor & Francis Journals, vol. 12(3), pages 337-355.
- Hua Wang, 2008. "Innovation in product architecture—A study of the Chinese automobile industry," Asia Pacific Journal of Management, Springer, vol. 25(3), pages 509-535, September.
- Slowak, André P., 2012. "Die Durchsetzung von Schnittstellen in der Standardsetzung: Fallbeispiel Ladesystem Elektromobilität," FZID Discussion Papers 51-2012, University of Hohenheim, Center for Research on Innovation and Services (FZID).
- Vincent Frigant, 2005. "Vanishing hand versus Systems integrators - Une revue de la littérature sur l'impact organisationnel de la modularité," Revue d'Économie Industrielle, Programme National Persée, vol. 109(1), pages 29-52.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kasey Kniffin).
If references are entirely missing, you can add them using this form.