Abstract
This paper examines the factors that affect market dominance in a standards competition by comparing the VHS-Beta war in the 1980s to the Blu-ray-HD-DVD war in the 2000s. We first look at the changing home video market from a technological development standpoint. Then we move on to discuss three main strategies in a standards war: first-mover advantage, indirect network effects and software provision, and strategic alliances of hardware firms. We find that technological innovation is essential. Being a first-mover is helpful, but not sufficient, toward building a dominant position in the market. Historical evidence shows that Sony created a network of complementary firms for Blu-ray. Consequently, an effective strategy to become a winner in a standards competition appears to be building a network of complementary products and subsequently an installed base.
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