The Complementary Role of Dominant Designs and Industry Standards

Abstract

Models of competition in innovative and standard-based industries have advanced considerably in recent years. Two terms that have become important competitive considerations are dominant designs and industry standards. This paper describes the potential for confusion between dominant designs and industry standards and attempts to clearly delineate between them. The role of standards is narrowly driven by the relative importance of network effects while dominant designs are persistent architectures with established implications for industries. However, standards are often important elements of dominant designs. There are many implications of this distinct, yet complementary, relationship between standards and dominant designs for managers. Perhaps the most important is that while dominant designs have been shown to presage industry shake outs, standards do not. In addition, a firm that establishes a dominant design does not often appear to reap competitive advantages from it, though one that establishes a standard may. Other implications for managers from this distinction are also discussed, including corporate strategy and first mover advantage

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