Developing Proprietary or Open Source Technology:
Learning from Five Case Studies
R.R. K. Sharma, Ajay Jha, Sandeep S Rajput
Department of Industrial Engineering, Indian Institute of Technology Kanpur, India (firstname.lastname@example.org, email@example.com, firstname.lastname@example.org)
Abstract – Companies in high technology area either have
to lead and set the industry standard, or quickly follow
the prevalent, or risk becoming obsolete. Learnings from
this paper are following: First, the Innovators tend to
develop proprietary technology to take advantage of first
to market and the late entrants try to make up by
developing open source technology. However the
proprietary strategy is not always successful in launching
improved substitute owing to the network effect and
switching cost and the market may favor an inferior
product. Second, the elite products are generally
produced under proprietary technology, whereas broad
base products are aimed by open Source. Third, with
time the proprietary systems are found expensive to
maintain, and are made open to sustain. Fourth,
proprietary technology aims for vertically integrated
supply chain leading to full ownership of upstream and
downstream supply components. Finally the long term
strategy calls for open source for greater market size.
Keywords - Strategy, High Technology Products,
Standards, Network Externality.
A standard is "a set of technical specifications adhered
to by a product, either tacitly or as a result of a formal
agreement" . Standardization is the process of getting
those specifications or products adopted, and require a
commitment of resources by both the developer of the
specification and the providers of the products that embody
it. Products that are compliant with standards are more
valuable to users than those that are not standard-compliant . Wide-scale standardization also encourages technology
adoption because it reduces adoption costs. Especially a
network product becomes more valuable to users when it is
compatible with complementary products . In IT
industries, network effects are observed both in physical
network products, such as automated teller machines, and in
intangible network products, such as spreadsheet software
that delivers value in the context of user communication and interaction [4,11]. When a technology or a product becomes
the standard in a market, it achieves the maximal
compatibility with other products and has higher value than
competing technologies. Thus it is strategic for technology
sponsors to make their respective technologies or products
the standards in markets. Standards are established through
different processes. In some cases, recognized formal
specifications for acceptance by firms in relevant industries; de jure standard. In other cases, standards emerge when one
product and its underlying technology specification becomes
dominant among the competing products in the market; de
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facto standard. . A variety of strategies can be employed in standardization processes, including technology licensing, strategic alliances, product diversification, and aggressive positioning . On the one hand, a firm can use competitive strategies like penetration pricing and preannouncement to
expand and retain an installed base of users, which is critical to making its proprietary technology the market standard . On the other hand, firms can form coalitions through
alliances, licensing, and cross-licensing their technologies to develop standards .
With this background we studied the development of events
in few cases on war of standards. The cases have been
developed using information on internet and associated
publications. The five cases analyzed are:
1. Apple versus Samsung (Smartphone Industry standard
2. Windows versus Linux (Software...
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