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

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  • 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.

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  • 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
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    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. Heinrich, Torsten, 2016. "The Narrow and the Broad Approach to Evolutionary Modeling in Economics," MPRA Paper 75797, University Library of Munich, Germany.
    8. 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.
    9. Heinrich, Torsten, 2015. "A Replicator Dynamic and Simulation Analysis of Network Externalities and Compatibility Among Standards," MPRA Paper 67198, University Library of Munich, Germany.

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