Compatibility Standards And Industry Competition: Two Case Studies

Abstract

Case histories of two data communication interfaces provide evidence of complex strategic behavior in the setting of voluntary compatibility standards. These cases show how subtle differences in the design of standards development organizations affect incentives to cooperate, giving rise to systematic venue preferences. Dominant firms prefer more bureaucratic procedures offering greater protection for the status quo. The two interfaces, FDDI (under development in X3) and DQDB (under development in the IEEE) shed light on competition between the computer and telecommunications industries and the evolution of our communications infrastructure. They demonstrate the importance of standards for intra- and inter-industry competition.