A Videoconference Research Seminar

"Winners Take Some” IT Standards Competition in the Presence of Digital Conversion Technology - An Empirical Analysis of the Flash Memory Market
by Charles LIU

Abstract

Both theoretical and empirical evidence suggests that in markets with standards competition, strong network effects can make the strong grow stronger and, in some circumstances, even “tip” the market towards a single, winner-take-all standard. We theorize that the presence of low cost conversion technologies will reduce the tendency towards market dominance in markets for digital goods. We empirically test our hypotheses in the context of the flash memory card market where both network effects and high quality digital conversion technologies are present.

Our results show that the availability of digital converters reduces the price premium of the leading flash card formats more than that of the minority formats. In addition, market concentration in the flash memory market decreases as converters become more widely available. Our findings imply that producers of non-dominant standards are better off with the provision of conversion technology, as this technology tends to neutralize the impact of network effects.

About the speaker

Charles LIU is a Ph.D. Candidate in Management Information Systems at the Katz Graduate School of Business, University of Pittsburgh. His research interests include technology adoption in digital goods markets, the economics of IS and strategic issues in software markets. His dissertation focuses on examining the impact of conversion technologies on standards competition in IT markets. These studies have been presented at several conferences such as ICIS, WISE and INFORMS and are under revision at Information Systems Research (ISR) and Management Science. His earlier work on common method bias in survey studies has been published in Communications of AIS. As a Ph.D. student, Charles won the 2006 Katz School Dean's Research Grant, the 2007 Net Institute Research Grant and is an ICIS Doctoral Consortium Fellow (2006). Prior to joining the Ph.D. program, he had worked in Xiamen International Airport, China as a Project Manager where he was responsible for designing and managing the air cargo information systems.