An empirical examination of the role of characteristics of the format, standard setting alliance and alliance partners in the market acceptance of formats
Dan, Sujan Mathew
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New product introductions rely on technologies that are often subject to strongly contested standards wars. In an attempt to ensure that the technical formats that their products are built upon, are the ones that gain widespread market acceptance and thereby emerge as industry standards, firms often engage in alliances to develop and/or market these technical formats. This research examines the relationships between the characteristics of standard setting alliances, those of the alliance partners, the technical formats and the market acceptance of the formats. In doing so, I seek to complement prior research by developing and empirically testing a theoretical framework of these relationships. While a few studies (Axelrod et al. 1995; Chiao, Lerner and Tirole 2007) have examined how firms form and organize standard setting alliances, the relationship between the characteristics of such alliances and their success (i.e., the market?s acceptance of the technical format supported by the alliance) is an under-researched subject. A format that is widely accepted by the market (adopted in more products and adopted by more firms) is in turn more likely to emerge as a standard. Using a unique data set of formats and standard setting alliances in the consumer electronics industry, assembled from multiple sources, I examine this link between standard setting alliances and format characteristics, and the market?s acceptance of the format. Results indicate that the relationship between the size of a standard setting alliance (number of partners in alliance) and the market acceptance of a format is inverted U-shaped. This suggests that a larger membership in the development alliance does not always imply that the alliance activities will lead to market acceptance of the format. I find that alliances with a greater proportion of generalists are shown to be capable of developing formats that find greater acceptance in the market. Marketing intensity in the years prior to forming the alliance is found to be important. The results also suggest that the broader the applicability of a technical format across industries, the greater its market acceptance. Interestingly though, the hypothesis that formalized alliances lead to greater market acceptance of the format was not supported by the data. I conclude with a discussion of the potential contributions and implications of the findings for marketing practice and future research.