SARChI Working Paper Series No. 2015-004

Standard-setting Strategy balancing between ‘De Facto’ and ‘De Jure’ in a Latecomer Country: The case of ICT industry in China

Yan Hui, Shamima Nasrin, Angathevar Baskaran and Mammo Muchie

The main objective of this study is to gain insights into the complexities of the standard-setting process involving a latecomer country. Standards are identified into two categories: market (de facto) standards arising from market interactions and formal standards (de jure) arising from mandatory specifications by public authorities. The study focused on two research questions: (i) What are the different factors that influence the outcome (success or failure) of a proposed standard by a latecomer country? (ii) How does a latecomer country navigate between de facto standard and de jure standard? It analyzed two cases (WAPI – a failure and TD-SCDMA – a success) to examine the extent of government support for a standard-setting that needs to balance between the de facto standard and de jure standard. The study found that standard competition is a complicated interplay between technology, markets, politics and institutions. The experience of two cases suggest that a proposed standard should partly be a ‘de jure standard’ which aims to protect national interests and achieve a national goal, and partly embody the ‘de facto standard’ to meet the technology trend, market demand, as well as the end users’ welfare. The other factors found to influence the success or failure of a standard proposed by a latecomer country include: compatible and interoperable technology, the strength of opponents, industry alliance, and industry foundation.

The paper makes two major contributions: (i) it adds case studies from a latecomer country to the standard-setting literature; (ii) it contributes towards standard strategy plan in China as well as other latecomer developing countries.

Keywords: Standardization; Latecomer country; Latecomer catch-up; De Facto standards; De June standards; ICT Industry.