How to profit from de facto standard-based competition: Learning from Japanese firms' experiences

This paper discusses strategic issues related to technological de facto standards. Based on our historical and empirical analyses of 13 cases mainly observed in the Japanese audio-visual and IT-related fields, we pose the following six propositions on de facto standard-based competition: 1 User will benefit by utilising and exchanging skill/software based on de facto standards, and manufacturers will benefit by forming de facto standards through their market dominance and licensing income. 2 A product which requires a high level of connectivity and accumulated skill/software is likely to form a de facto technological standard. 3 The earlier a firm establishes a majority of the market share, the more likely it is to establish a technological de facto standard. 4 A de facto standard is likely to be fixed when its diffusion (share) reaches 2-3% of the market. 5 The more killer applications a firm can introduce the more likely it is to establish/maintain/profit from a technological de facto standard. 6 The more efforts a firm makes to promote its technology/product to its competitors, suppliers and distributors, the more likely it is to establish/maintain/profit from a technological de facto standard.