Vertical information systems (VIS) standards are technical specifications designed to promote coordination among the organizations within (or across) vertical industry sectors. Examples include the bar code, electronic data interchange (EDI) standards, and RosettaNet business process standards in the electronics industry. This contribution examines VIS standardization through the lens of collective action theory, applied in the literature to information technology product standardization, but not yet to VIS standardization, which is led by heterogeneous groups of user organizations rather than by IT vendors. Through an intensive case analysis of VIS standardization in the U.S. residential mortgage industry, VIS standardization success is shown to be as problematic as IT product standardization success, but for different reasons. VIS standardization involves two linked collective action dilemmas--standards development and standards diffusion--with different characteristics, such that a solution to the first may fail to resolve the second. Whereas prior theoretical and empirical research shows that IT product standardization efforts tend to splinter into rival factions that compete through standards wars in the marketplace, successful VIS Standards consortia must encompass heterogeneous groups of user organizations and IT vendors without fragmenting. Some tactics successfully used to solve the collective action dilemma of VIS standardization (e.g., governance mechanisms and policies about intellectual property protection) are also used by IT product standardization efforts, but some are different, and successful VIS standardization requires a package of solutions tailored to fit and jointly resolve the specific dilemmas of particular VIS standards initiatives.
Vertical IS standards prescribe data structures and definitions, document formats, and business processes for particular industries, in contrast to generic information technology (IT) standards, which concern IT characteristics applicable to many industries. This paper explores the potential industry structure effects of vertical information systems (IS) standards through a case study of the U.S. home mortgage industry. We review theoretical arguments about the potential industry structure effects of standards for interorganizational coordination, and we compare the characteristics of XML-based vertical IS standards with those of electronic data interchange (EDI) to gauge the applicability of prior literature. We argue that the lower costs and wider accessibility of XML-based standards that use the Internet can result in significant changes to the structure of the mortgage industry. However, the nature of industry change will depend on the specific ways In which standards are implemented by organizations in the industry--there are many patterns of implementation with potentially different effects at the industry level of analysis. We illustrate these theoretical arguments with data from our case.