Network externality, standardization and technology competition

Abstract

In this dissertation, I explore the results of the technology competition in the network market and I suggest the direction of technology policy under the perception of network externalities. Also, this dissertation examines the standard compatibility strategy between developing country and multinational corporation, and assays what condition allows international standard coalition between developing country and multinational corporation (advanced country), and derives some of applicable policy implications. Selection of standard in network market which has network externalities are explained by network effect affecting consumers’ decision making and companies’ standard competition strategy. Katz and Shapiro(1985) insist three types of network effect with network externalities in network market. Besen and Farrell(1994) investigate corporate strategies under the standard competition in network market and two competing corporates’ strategies in particular. In the paper, they study 3 strategies that are focused on compatibility. The first concept is tweedledum and tweedledee, second one is battles of the sexes, third one is pesky little brother. Then they suggest two competing corporates’ strategic alternatives based on the awareness of present position. Despite they provide useful methods analyzing network industry, their study has practical limit explaining Qualcomm’s success story of CDMA in Korean market. Specifically, government intervention, cultural differences and geographical distance disturb the homogeneity of market environment, then network externalities characterized by network market may be weakened. Thus, these factors limit adopting analysis mentioned above. Especially, great concerns should be given to the cases that the government intervenes domestic market to protect domestic industry in standard competition. In this paper, we will theoretically discuss R&D competition, technology diffusion, technology economics that handles economic impacts of ...