Technological Advance and the Changing Structure of Transnational Standards Organizations

Since the 1980s, there has been a significant shift in standards activities from traditional standards development organizations (SDOs) to IT consortia. Included among these, for example, have been consortia to develop standards for Switched Multimegabit Data Services (SMDS), Fiber Distributed Data Interface (FDDI) over twisted pair, asynchronous transfer mode (ATM) and frame relay technologies. The major user consortia have included the Corporation for Open Systems (COS), Manufacturing Automation Protocol (MAP), and the Technical Office Protocol (TOP) (Weiss and Cargill 1992). Operating on a relatively exclusive basis, these groups greatly simplified the standards process. Unlike traditional standards organizations, consortia have tended to be relatively loosely coupled, and unbound by rules requiring elaborate processes and openness on a broad scale (Cargill 2004; Hawkins 1999; David and Schurmer 1996). The rise of consortia has been explained in a variety of fashions. For example, focusing on the role of transaction costs, some have argued that, because consortia involve fewer players and not as many due process constraints, it takes far less time and resources to negotiate standards outcomes in consortia than it does in traditional standards developing bodies (Cargill 2002; Weiss and Cargill 1992). Others have pursued a rational actor model, contending that firms have more incentives to join consortia than they do traditional SDOs, not only because there are fewer members to share the benefits, but also because side agreements are more easily negotiated (Schallop 2000; Garcia 2005). Still others argue along institutional lines, suggesting that today’s standards development organizations are becoming isomorphic both with respect to each other and to their larger institutional environments (Bunduchi et al 2005; Egyedi 2000; Werle 2000). While these explanations provide considerable insight into the nature of consortia, they fail to provide a totally satisfactory explanation. In particular, they do not adequately account for the role of network structure. That is, they fail to consider what is it about today’s networked‐based global environment that has led to the rapid emergence of consortia as the standards organization of choice, and what is it about the network structure of consortia that matches the needs of the times? This paper addresses these questions. It argues that what differentiates today from the earlier industrial period is the fast paced, network‐based, intensively competitive nature of the global economy. In such an environment, firms must place a premium on gaining competitive advantage not solely by reducing costs, but also — and perhaps more importantly — through information access and continuous innovation. The preference for standards consortia over traditional SDOs reflects this imperative.