Sponsors, Communities and Standards: Winning in the Local Area Networking

Abstract

* The authors gratefully acknowledge the industry participants who consented to be interviewed for this research and commented on previous versions of this paper. ABSTRACT: Economics has treated technological standards creation as an outcome of network externalities and decisions on the demand side. They pay little attention to the supply side, where firms make strategi choices on which standard to support. These choices can ignite a contest between adherents to the different proposed standards. This case study examines the contest btween the Ethernet and Token Ring standards for local area networking. We find that the critical difference in explaining the success of Ethernet vibrancy was the nature and strategy of the standard's sponsors in assisting the growth of a community of firms supporting the standard. IBM sponsored Token Ring, but then made it difficult for other firms to be successful supplying components. In contrast, Ethernet's sponsors, DEC, Intel, and Xerox, structured the marketplace in such a way as to encourage supporters. The resulting community was able to lower costs and improve the technology so dramatically that the initially technically superior Token Ring was overwhelmed. The result was Ethernet's more rapid growth and eventual dominance as the LAN technology of choice. Moreover, the increasingly large community eventually enabled Ethernet to outstrip Token Ring.

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Cite this paper

@inproceedings{Kenney2003SponsorsCA, title={Sponsors, Communities and Standards: Winning in the Local Area Networking}, author={Martin Kenney}, year={2003} }