Back from the brink: Microsoft and the strategic use of standards in the Browser Wars

The browser wars are probably the best-chronicled standards competition in recent history. Yet the standard lock-in model does not readily account for the dramatic change in fortunes of Microsoft. At one time it seemed that Microsoft would be go the way of IBM before it and fail to catch the next technological wave in the computer industry. However Microsoft managed to capture the browser market, overturning Netscape''s initial domination of the market. In seeking to understand this dramatic return of events, the paper begins by outlining the key elements of the Arthur model. This is followed by a historical narrative of the browser wars that highlights three aspects of this technological competition; firms'' strategic use of standards, users'' considerations of initial set-up costs, and the degree of interconnectivity between product markets. The paper finally considers how the standard lock-in model may be extended in order to encompass these dimensions.economics of technology ;

Technological diffusion, welfare and growth: technological succession in the presence of network externalities

The paper examines the conditions under which technological successions can occur in the presence ofnetwork externalities. A multi-agent model is developed in which the product designs offered by firmsco-evolve with consumer preferences. Firms compete though product innovation. The modelincorporates a modified genetic algorithm (GA) in which imitation is conducted via a process ofselective transfer (a one-way crossover) and internal R&D is conducted via selective mutation.Following an initial period in which old technology firms develop their designs and networkexternalities accrue, a technological shock occurs in which new technology-based firms enter themarket. The findings of the model indicate that a necessary condition for a technological successionare the existence of at least one consumer group that champions the new technology, developing newpreferences for its characteristics. Further, the introduction of novel characteristics are have a greaterbearing on the probability of a succession than incremental gains in characteristics offered by the oldtechnology. Third, the analysis identifies an inverse relationship between time the probability of atechnological succession.economics of technology ;

The Self-Organisation of Strategic Alliances

Strategic alliances form a vital part of today's business environment. The sheer variety of collaborative forms is notable - which include R&D coalitions, marketing and distribution agreements, franchising, co-production agreements, licensing, consortiums and joint ventures. Here we define a strategic alliance as a cooperative agreement between two or more autonomous firms pursuing common objectives or working towards solving common problems through a period of sustained interaction. A distinction is commonly made between 'formal' and 'informal' inter-firm alliances. Informal alliances involve voluntary contact and interaction while in formal alliances cooperation is governed by a contractual agreement. The advantage of formal alliances is the ability to put in place IPR clauses, confidentially agreements and other contractual measures designed to safeguard the firm against knowledge spill-over. However, these measures are costly to instigate and police. By contrast, a key attraction of informal relationships is their low co-ordination costs. Informal know-how trading is relatively simple, uncomplicated and more flexible, and has been observed in a number of industries. A number of factors affecting firms' decisions to cooperate or not cooperate within strategic alliances have been raised in the literature. In this paper we consider three factors in particular: the relative costs of coordinating activity through strategic alliances vis-a-vis the costs of coordinating activity in-house, the degree of uncertainty present in the competitive environment, and the feedback between individual decision-making and industry structure. Whereas discussion of the first two factors is well developed in the strategic alliance literature, the third factor has hitherto only been addressed indirectly. The contribution to this under-researched area represents an important contribution of this paper to the current discourse. In order to focus the discussion, the paper considers the formation of horizontal inter-firm strategic alliances in dynamic product markets. These markets are characterised by rapid rates of technological change, a high degree of market uncertainty, and high rewards (supernormal profits) for successful firms offset by shortening life cycles.Strategic Alliances, Innovation Networks, Self-Organisation

The Self-Organisation of Innovation Networks

This paper explores the self-organising principles of horizontally-integrated innovation networks. It isshown that such networks can self-organising in environments where the co-ordination and production ofnew knowledge is itself a complex, dynamic and highly non-linear processes. The paper argues thedevelopment of a self-organisation perspective of innovation networks has two advantages. First, itprovides a general framework of dynamic systems in which different strands of a highly fragmentedliterature can be drawn together. Second, formal self-organisation modelling techniques can provideinteresting new insights into the micro-macro processes driving dynamic innovation systems.Section 1 of the paper identifies the four key principles of self-organisation: local interaction, non-linearity,thermodynamic openness and emergence. Section 2 discusses important complementarities between self-organisationtheory and the ‘new’ theory of innovation, with the latter’s emphasis of the systemic nature ofknowledge production within innovation networks containing multiple private and public institutions thatare connected in highly complicated and non-linear ways. This paves the way for a formal model of self-organisinginnovation networks presented in section 3. Section 4 discusses the main properties of theoutputs generated by the model and its novel insights, section 5 summarising and considering the potentialadvantages for current and future research offered by the self-organisation approach.research and development ;

Knowledge-intensive services and international competitiveness: a four country comparison

The nature and consequences of services innovation remains a woefully under-researchedtopic. The paper calls into question two statements that are frequentlyrepeated in the political-economic discourse on services. The first concerns thesuggestion that Germany is a ‘services laggard’ that needs to restructure its domesticeconomy if it is to remain internationally competitive. By contrast, the UK is frequentlyheld up as an example of a successfully restructured ‘services economy’. The paperdraws an important distinction between the quantity of services in a domestic economyand the degree of connectivity between services and other economic activities. Thelatter, it is argued, is far more important in determining the size of spillovers fromservices innovation enjoyed within a domestic economy and, hence, to internationalcompetitiveness. Particular attention is paid to the role and impact of knowledge-intensiveservice sectors in this regard. In addition to the UK and Germany, data isdrawn from the Netherlands and Japan. Using these four comparative cases we explorethe distinction between a high representation of services in the domestic economy, andthe innovation spillovers facilitated by a high degree of connectivity between servicesand other economic sectors within a domestic economy.economic development an growth ;

Structural change in the presence of network externalities: a co-evolutionary model of technological successions

The paper examines the conditions under which technological successions can occur in the presence of network externalities. A two-stage, multi-agent simulation model is presented in which product designs co-evolve with consumer preferences. It provides a rich framework in which to study the complex phenomenon of quality. Following an initial period, in which old technology firms develop their designs and externalities accrue, a technological shock occurs. New technology firms and new consumer classes enter the market. Data from the simulation model is analysed by identifying a robust econometric model of the probability of succession, given the immediate state of the post-shock market. 4 factors affecting the probability of a succession are identified. First, succession can occur if gains in direct utility from higher quality new technology goods outweigh the network utility of old technology goods. Second, sailing ship effects are possible. Old firms can innovate in order to see off the new entrants. Hence, a better initial (new technology) design does not guarantee succession. Third, a trade-off exists between quality and price. A succession will not occur if cost (price) differentials favour the old technology. Consequently, increasing returns in production enjoyed by established firms are an important barrier to successful entry. The fourth factor is time: the relative length of time old firms have to develop their products, and that which new firms have to develop their products.research and development ;

Factors affecting the adoption of intranets and extranets by SMEs: a UK study

The adoption of intranets and extranets involve major organisational innovation. Intranets alter the flows and content of internal communications, while extranets alter communications between the firm and its clients and suppliers. The paper identifies a number of potential factors that may affect adoption. These include internal and external business drivers, the role of the CEO/owner, firms’ absorptive capacity, firm size amongst SMEs, and business activity. Neither the relative size nor the business activities of SMEs have been considered in previous studies. Logit regressions are run on factors influencing the adoption of intranets and client extranet for a sample of 164 UK SMEs. The findings challenge two oft-stated views. First, that ICT adoption in SMEs depends on the CEO/owner being the ICT decision-maker. The findings clearly indicate that adoption is positively related to firm size. Larger sized SMEs firms have more complex organisational structures in which a specialist manager – typically holding the title ‘IT Manager’ – is the key decision-maker on ICT investments. Adoption depends on the quality and drive of these managers, not the CEO/owner. Second, the myth that services are technological laggards is clearly exposed. Knowledge intensive service firms, not manufacturing firms, are the champions of extranet technologies in this sample. In addition, both knowledge intensive service and manufacturing SMEs are key champions of intranet adoption. Expansion of national, not global, market share is the most important strategic objective identified in the study. The ability to integrate previously separate ICT systems is another important factor for intranet adopters. The results differ with respect to external customer and competitor pressure. These are found to be important in intranet adoption but not in extranet adoption. Only very weak support can be identified for the importance of absorptive capacity. A clear problem remains with regards to identifying a clear set of instruments with which to test for absorptive capacity.economics of technology ;

Networks, Noise and Navigation: Sustaining Metcalfe’s Law through Technological Innovation

The paper examines the relationship between network externalities and the value ofthe World-Wide Web. It is shown that value depends on two offsetting effects. First,as the Web grows in size, so existing users gain from the additional content providedby new users. This is the standard concept of a network externality. However, at thesame time, a large and expanding network can suffer from congestion. Congestioncan manifest itself in the time taken to download information from the Web. But anarguably more important problem is navigating the very large number of webpages onoffer and to identify the particular page containing information that is of interest.These navigation issues have serious implications for the continued growth of theWeb, as described by Metcalfe’s Law.economics of technology ;