Late Standardization and Technological Catch-Up

LATE STANDARDIZATION AND TECHNOLOGICAL CATCH-UP By Apiwat Ratanawaraha B.Eng. (Urban Engineering), University of Tokyo,1996 M.Phil. (Land Economy), University of Cambridge,1997 M.C.P., Massachusetts Institute of Technology, 2002 Submitted to the Department of Urban Studies and Planning in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Economic Development and Technology Policy at the Massachusetts Institute of Technology September 2006 @2006 Apiwat Ratanawaraha. All Rights Reserved. The author hereby grants to MIT permission to reproduce and to distribute publicly paper and electronic copies of this thesis document in whole or in part in any medium now known or hereafter created. L, Signature of Author fl 1 1) Department of Urban Studies and Planning / June 7, 2006 41 //I Certified by ,L -, a II I r, I- Alice H. Amsden Barton L. Weller Professor of Political Economy Thesis Supervisor A. Accepted by /X! Professor Frank Levy Daniel Rose Professor of Urban Economics Chair, Ph.D. Committee MASSACHUS•T IN E OF TECHNOLOGY OCT 26 2006 ARCHIVES LIBRARIES 3 ttei wO 1 J b'IAlTh LATE STANDARDIZATION AND TECHNOLOGICAL CATCH-UP by Apiwat Ratanawaraha Submitted to the Department of Urban Studies and Planning on June 7, 2006 in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Economic Development and Technology Policy ABSTRACT In this study, we examine the process of "late standardization," in which latecomers engage in standards activities in order to move towards and beyond the technological frontier. Based on case studies of latecomers in the semiconductor and mobile telecommunication industries in South Korea and Thailand, we analyze the strategic, organizational, and institutional aspects of the late-standardization process. We hypothesize that latecomer firms and states must engage in standards activities to progress beyond catch-up, because standards are a prerequisite to technological development. Standards are strategic leverages that allow latecomers to link with and learn from technology leaders. Specifically, latecomer firms have to engage internally in quality standardization to take advantage of latecomer advantages. Quality standards help improve production capability, while enhancing credibility and reputation. Without quality control, latecomers cannot become part of global value chains and have difficulty in acquiring advanced technologies from forerunners. As latecomers become fast followers, they have to participate in external standardization. The goal is to acquire knowledge about emerging technologies and standards. By linking with and learning from forerunners, fast followers enhance second-mover advantages derived from ramp-up capability. Once their R&D efforts bear fruit and they become technology leaders, advanced "late standardizers" have to lead external standardization efforts. This would enable them to exploit innovation capability and gain first-mover advantages derived from proprietary technologies and learning-curve effects. As latecomers move towards the technological frontier, standards activities become the core of research and development strategy and policy. They also adjust organizational structures and human resource management to accommodate standards efforts. The state plays critical yet changing roles throughout the late-standardization process. It sets up standards institutions and provides "infratechnologies" for quality control. The state also mitigates technology and market risks associated with new standards, while facilitating networking among late-standardizing firms. As late standardizers become technology and standards leaders, the state pursues "standards diplomacy" for overseas adoption of its domestic standards, while strengthening the protection of intellectual property rights. Thesis Supervisor: Alice H. Amsden Title: Barton L. Weller Professor of Political Economy 5 ACKNOWLEDGMENTS While time and space for acknowledgments are limited, the generosity and kindness extended to me have been boundless. I am grateful for the support and encouragement that I received from my dissertation committee. I would like to thank Professor Alice H. Amsden for the intellectual stimulation and inspiration since my first term at MIT. I became interested in industrial and technology policy from the very first class in her course Economic Development and Industrial Policy. I would like to thank Professor Karen R. Polenske for her academic guidance and emotional support. I am particularly grateful for her selecting me to work on the book "The Economic Geography of Innovation." I am grateful to Professor Calestous Juma for his encouragement and helpful comments. With his kind help, I received an internship at UNCTAD, where I first became interested in standards. I sincerely appreciate Professor Bish Sanyal's support and his intellectually challenging questions. Although my doctoral research has nothing to do with transportation planning, I benefited greatly from my previous research work for Professor Ralph Gakenheimer. I am indebted to all the experts who kindly assisted me, in one way or another, during my field research: Mian Quddus, Sanghoon Lee, Huemjeng Kang, Osok Song, Jinsung Choi, Hong-Lim Lee, Juyeon Song, Dong Yang Lee, Jang-Sup Shin, Chaisung Lim, Seungmin Benjamin Lee, Patrick Moran, T.W. Kwon, J.K. Kim, B.K. Ng, Gil Russell, Desi Rhoden, Ming-Feng Yen, Art Kilmer, Arnon Tuntiang, Wichian Mektrakarn, Montakarn Ahkuputra, Patarapong Intarakumnerd, and Narat Rujirat. My doctoral studies would not have been possible without the help from the administrative: staff in DUSP: Sandy Wellford, Alice Twohig, Nimfa de Leon, Karen Yegian, Phil Sunde, and many others. I greatly appreciate the following institutions for their generosity that has financially supported my academic endeavor: Harvard Yenching Institute, MIT Center for International Studies, MIT Industrial Performance Center, Cambridge-MIT Institute, Harvard Belfer Center for Science and International Affairs, the Rodwin Family, the Emerson Travel Fund, and the Royal Thai Government. Further thanks go to all my friends at MIT and beyond, who help me save my sanity throughout this long process. Thumper and Tigger, I thank both of you for keeping my lap warm while working on the manuscript. Last but certainly not least, my graduate studies in the United States would have been impossible without the unconditional love and support from my family in Thailand and Massachusetts. CONTENTS ABSTRACT 4 ACKNOWLEDGMENTS 5 TABLES AND FIGURES 9 ONE: STANDARDIZING LATE 11 Standards and Technological Catch-Up mResearch Questions and Hypotheses . Research Design and Methodology * Skimming the Surface: Main Findings . Structure of Dissertation Two: LATE STANDARDIZATION AND TECHNOLOGICAL CATCH-UP 49 Overview of Standards and Standardization a Standards and Technological Development . Catch-Up and Late Industrialization mA Model of Late Standardization and Technological Catch-Up * Concluding Remarks THREE: THE ASCENT OF LATE STANDARDIZERS 87 Continuous Dominance of Forerunners * Emergence of Late Standardizers . Late Standardizers as Standards Leaders n Late Standardizers in Semiconductor . Late Standardizers in Mobile Telecom mConcluding Remarks FOUR: STANDARDS AS STRATEGIC LEVERAGE 121 Competitive Advantage and Order of Market Entry mCompetitiveness and Resource-Based Theory mStandards as Leverage: Linking and Learning mConcluding Remarks FIVE: CASE STUDIES OF LATE STANDARDIZERS IN SEMICONDUCTOR 155 Samsung's Late Standardization in Semiconductor mSamsung as Latecomer . Samsung as Fast Follower mSamsung as Standards Leader . Other Late Standardizers in Semiconductor mConcluding Remarks SIX: CASE STUDIES OF LATE STANDARDIZERS IN MOBILE TELECOM 193 Background on Mobile Communication Services n Late Standardization of Korean Firms . Organizational Structure for Standards Activities mStandards and Intellectual Property . Thai Late Standardizers in Mobile Telecom n Concluding Remarks SEVEN: THE STATE'S ROLE IN LATE STANDARDIZATION 243 Providing Infratechnologies for Quality Control m Establishing Standards Institutions . Promoting Networking mMitigating Technology and Market Risks 0 "Standards Diplomacy" for Overseas Market Expansion mProtecting Intellectual Property mConcluding Remarks EIGHT: CONCLUSIONS 301 Generalizability of the Late-Standardization Model: Other Countries, Other Industries, and Other Time Periods . Standards as a Source of Trade Conflicts . Standards Forums and Collusion * Branding and Late Standardization a Late Standardization in Open-Source Regime NOTES 319 BIBLIOGRAPHY 325 TABLES Table 1.1: Firms and Institutions Selected for the Case Studies 34 Table 2.1: Comparison of Studies on Technological Catch-Up 69 Table 2.2: Main Characteristics in the Three Phases of Innovation Dynamics 73 Table 2.3: Stages of Late Standardization and the Corresponding Activities and Capabilities 79 Table 3.1: National Standards in Select Industrialized and Latecomer Countries 89 Table 3.2: ISO Members' Participation in Standards Development Process, 2002 92 Table 3.3: Level of Contribution and Leadership of Latecomers in ISO Standardization, 1998- 2004 97 Table 3.4: Participation of Latecomers in ITU, 2004 99 Table 3.5: Participation of Latecomer Firms in ETSI, 2004 103 Table 3.6: Examples of Korean Standards Leaders in Semiconductor and Mobile Telecom 104 Table 3.7: Technology Standards for DDR2 105 Table 3.8: Examples of Standards Development Organizations in the Semiconductor Industryl08

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