The economic realities of open standards: black, white, and many shades of gray

Abstract

Open standards have long been popular among buyers of goods and services in the information technology sector. Self-interested buyers and sellers, however, have had incentives to overstate (or understate) the openness of various standards. This paper rejects the simplified view that there is a single model of an open standard, as well as the assumption that a fully open solution is always an optimal (or even a feasible) outcome. The author analyzes various economic and technological forces that make standards more or less open and how these economic forces are affected by the policy choices available to firms, standards setting organizations, and regulators. The author uses this analysis to suggest objective measures for standards openness and a typology of common bundles of standards rights; he also notes the practical limits to open standards. * Joel West is Associate Professor of Technology Management, College of Business, San Jose State University. He can be reached at Joel.West@sjsu.edu ; http://www.joelwest.org. The author would like to thank Donald Deutsch, Phil Gross and Andy Updegrove for sharing their experience and depth of knowledge of standardization processes. The discussions with Ken Krechmer and Tim Simcoe regarding their own evolving ideas on open standards, and comments on earlier versions by Scott Gallagher and Kai Jakobs were also greatly appreciated. Finally, the author thanks the editors for their invaluable guidance, encouragement, and patience.