Antecedents of a Transaction Cost Theory of Vertical IS Standardization Processes

The analysis of standardization processes is dominated by the concept of positive network externalities. This paper develops an alternative view on standardization processes which is based on transaction costs rather than positive network externalities. We call this view the institutional view and distinguish it from the physical view that is associated with the concept of positive network externalities. We develop a transaction cost‐theoretic model of standardization processes in the context of the development of vertical IS standards and discuss its merits and limitations. We also use some findings regarding the development of EDI‐based interorganizational information systems to motivate our efforts.

[1]  Malcolm Rutherford.  Institutional Economics: Its Place in Political Economy , 1989 .

[2]  C. Kindleberger.  Standards as Public, Collective and Private Goods , 1983 .

[3]  Jeffrey L. Funk,et al.  Standards, dominant designs and preferential acquisition of complementary assets through slight information advantages , 2003 .

[4]  M. Lynne Markus,et al.  Standards and Public Policy: Promoting e-business through vertical IS standards: lessons from the US home mortgage industry , 2006 .

[5]  J. West,et al.  What are Open Standards? Implications for Adoption, Competition and Policy , 2004 .

[6]  S. Liebowitz,et al.  Path Dependence, Lock-In, and History , 1995 .

[7]  M. Kenney,et al.  Sponsors, Communities, and Standards: Ethernet vs. Token Ring in the Local Area Networking Business , 2003 .

[8]  J. R. Commons.  Institutional Economics: Its Place in Political Economy, Volume 2 , 1989 .

[9]  Kenneth I. Carlaw,et al.  Externalities, technological complementarities and sustained economic growth , 2002 .

[10]  Hunter Crowther-Heyck,et al.  Coordinating technology: Studies in the international standardization of telecommunications , 2001 .

[11]  M. Shurmer.  An investigation into sources of network externalities in the packaged PC software market , 1993 .

[12]  N. Economides,et al.  Critical Mass and Network Size with Application to the Us Fax Market , 1995 .

[13]  Sanford V. Berg,et al.  The Production of Compatibility: Technical Standards as Collective Goods , 1989 .

[14]  Omar El Sawy,et al.  The impact of common e-business interfaces , 2003, CACM.

[15]  Tridas Mukhopadhyay,et al.  Overcoming EDI Adoption and Implementation Risks , 1999, Int. J. Electron. Commer..

[16]  S. J. Liebowits.  Path dependence, lockin, and history , 1995 .

[17]  Shane Greenstein,et al.  Did Installed Base Given an Incumbent Any (Measurable) Advantages in Federal Computer Procurement , 1993 .

[18]  Marc van Wegberg.  Standardization and Competing Consortia: The Trade-Off Between Speed and Compatibility , 2004, Int. J. IT Stand. Stand. Res..

[19]  Bala Iyer,et al.  Make Way for the Penguin? Explaining Commitment to Linux by Independent Software Companies , 2004 .

[20]  C. Shapiro,et al.  Network Externalities, Competition, and Compatibility , 1985 .

[21]  Boriana Rukanova,et al.  Identification of different types of standards for domain-specific interoperability , 2003 .

[22]  Richard E. Caves,et al.  American Industry: Structure, Conduct, Performance , 1992 .

[23]  M. Porter,et al.  The Competitive Advantage of Nations. , 1990 .

[24]  Sidney C. Sufrin,et al.  The Logic of Collective Action: Public Goods and the Theory of Groups. , 1966 .

[25]  Stan J. Liebowitz,et al.  The Fable of the Keys , 1990, The Journal of Law and Economics.

[26]  James I. Cash,et al.  Interorganizational systems: An information society opportunity or threat? , 1985, Inf. Soc..

[27]  Kai Jakobs.  Standardisation Processes in IT: Impact, Problems and Benefits of User Participation , 1999 .

[28]  Kalle Lyytinen,et al.  Contours of diffusion of electronic data interchange in Finland: Overcoming technological barriers and collaborating to make it happen , 1998, J. Strateg. Inf. Syst..

[29]  Kai Reimers.  Standardizing the New E-Business Platform: Learning From the EDI Experience , 2001, Electron. Mark..

[30]  Ben Ross Schneider,et al.  Business Associations and Economic Development: Why Some Associations Contribute More Than Others , 2000, Business and Politics.

[31]  Donatella Sciuto,et al.  Business Associations as Hubs of Inter-Organisational Information Systems for SMEs - The 2Cities Portal , 2005 .

[32]  Stan J. Liebowitz,et al.  NETWORK EFFECTS , 2005 .

[33]  Nitin Aggarwal,et al.  Standards Setting Consortia: A Transaction Cost Perspective , 2005, Proceedings of the 38th Annual Hawaii International Conference on System Sciences.

[34]  Carol Stoak Saunders,et al.  Data exchange in interorganizational relationships: review through multiple conceptual lenses , 2005, DATB.

[35]  Stephen E. Margolis,et al.  Network externality : an uncommon tragedy , 1994 .

[36]  Hope Koch.  Inter-Organizational Information System Adoption and Diffusion: A Review and Analysis of Empirical Research , 2005 .

[37]  P. David,et al.  The Economics Of Compatibility Standards: An Introduction To Recent Research 1 , 1990 .

[38]  Ken Krechmer.  The Meaning of Open Standards , 2005, Proceedings of the 38th Annual Hawaii International Conference on System Sciences.

[39]  Robert J. Kauffman,et al.  The Network Externalities Hypothesis and Competitive Network Growth , 2002, J. Organ. Comput. Electron. Commer..

[40]  Sherah Kurnia,et al.  Exploring the roles of external parties in ECR adoption: An Australian study , 2005 .

[41]  Carl Cargill,et al.  Standards and Public Policy: Standardization: a failing paradigm , 2006 .

[42]  Neil Gandal,et al.  The DVD vs. DIVX Standard War: Network Effects and Empirical Evidence of Vaporware , 1999 .

[43]  Neil Gandal,et al.  Indirect Network Effects and Adoption Externalities , 2002 .

[44]  Melissa A. Schilling.  Technology Success and Failure in Winner-Take-All Markets: The Impact of Learning Orientation, Timing, and Network Externalities , 2002 .

[45]  Kalle Lyytinen,et al.  The Role of Intermediating Institutions in the Diffusion of Electronic Data Interchange (EDI): How Industry Associations Intervened in Denmark, Finland, and Hong Kong , 2001, Inf. Soc..

[46]  Neil Gandal,et al.  Competing Compatibility Standards and Network Externalities in the PC Software Market , 1995 .

[47]  Cristiano Antonelli,et al.  The economics of path-dependence in industrial organization , 1997 .

[48]  Takuma Takahashi,et al.  Three attempts at “de-Wintelization”: Japan’s TRON project, the US government’s suits against Wintel, and the entry of Java and Linux , 2003 .

[49]  M. Olson,et al.  The Logic of Collective Action: Public Goods and the Theory of Groups. , 1973 .

[50]  M. Lynne Markus,et al.  The Evolution of Vertical IS Standards : Electronic Interchange Standards in the US Home Mortgage Industry , 2004 .

[51]  K. Lyytinen,et al.  Standard making: a critical research frontier for information systems research , 2006 .

[52]  D. Hemenway.  Industrywide voluntary product standards , 1975 .

[53]  B. Loasby.  The External Control of Organizations. A Resource Dependence Perspective , 1979 .