CAN VENDORS INFLUENCE SWITCHING COSTS AND COMPATIBILITY IN AN ENVIRONMENT WITH OPEN STANDARDS?

Author List: Chen, Pei-yu; Forman, Chris;
MIS Quarterly, 2006, Volume 30, Issue 0, Page 541-562.
This paper examines the potential social costs of standardization, including possible vendor reactions to standards and their impacts on the adoption of new technology and long-term market structure. Specifically, we study how vendors might react to standards in the market for routers and switches, two of the most important pieces of networking hardware for the information systems infrastructure of modern firms. Using data from over 22,000 establishments surveyed by Harte Hanks Market Intelligence, we provide evidence that vendors are able to maintain high switching costs in the market for routers and switches despite the presence of open standards in the industry. Several vendor actions are discussed in this paper, including manipulating horizontal compatibility between comparable rival products and vertical compatibility between complementary products, maintaining a broader product line, creating product suites, and targeting specific market segments. Our results further suggest that the presence of switching costs can lead to inefficient adoption of new information technology and that vendors may be able to influence the speed of new information technology adoption.
Keywords: compatibility; Open standards; routers; switches; switching costs
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#16 0.200 infrastructure information flexibility new paper technology building infrastructures flexible development human creating provide despite challenge possible resources specific advances developing
#117 0.168 standards interorganizational ios standardization standard systems compatibility effects cooperation firms industry benefits open interoperability key heterogeneous vertical propose vendors collective
#242 0.164 market competition competitive network markets firms products competing competitor differentiation advantage competitors presence dominant structure share using incumbent make important
#151 0.105 costs cost switching reduce transaction increase benefits time economic production transactions savings reduction impact services reduced affect expected optimal associated
#108 0.102 model research data results study using theoretical influence findings theory support implications test collected tested based empirical empirically context paper
#49 0.069 adoption diffusion technology adopters innovation adopt process information potential innovations influence new characteristics early adopting set compatibility time initial current
#22 0.064 software vendors vendor saas patch cloud release model vulnerabilities time patching overall quality delivery software-as-a-service high need security vulnerability actually
#234 0.063 social networks influence presence interactions network media networking diffusion implications individuals people results exchange paper sites evidence self-disclosure important examine