Market- and committee-based mechanisms in the creation and diffusion of global industry standards: the case of mobile communication

Jeffrey L Funk, and David T. Methe

1/01/2005
(Original Publish Date: 2001)

The existing literature on industrial standards almost exclusively focuses on pure market competition; this paper shows how and why both governments and firms have had a strong effect on the creation of global standards in the mobile communication industry through a hybrid system of committees and markets. According to our model, governments can and did influence forecasted and actual installed base for systems in the mobile communications industry through their influence on product demand (e.g., by determining the amount of competition in the market) and the number of and degree of openness in the standards. In particular, the choice of a single standard (by either a large single country or region) dramatically and instantaneously increased the forecast for the standard's domestic installed base, thus causing other countries to also adopt the standard.