Coalition Formation in Standard-Setting Alliances

Robert Axelrod, Will Mitchell, Robert E. Thomas, D. Scott Bennett and Erhard Bruderer
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Robert Axelrod: University of Michigan School of Public Policy, Ann Arbor, Michigan 48109-1220
Will Mitchell: University of Michigan School of Business Administration, Ann Arbor, Michigan 48109-1234
Robert E. Thomas: University of Florida College of Business Administration, Business Building, Gainesville, Florida 32611
D. Scott Bennett: SUNY at Buffalo, Department of Political Science, Buffalo, New York 14260
Erhard Bruderer: University of Minnesota, Carlson School of Management, Management Building, Minneapolis, Minnesota 55455

Management Science, 1995, vol. 41, issue 9, 1493-1508

Abstract: We present a theory for predicting how business firms form alliances to develop and sponsor technical standards. Our basic assumptions are that the utility of a firm for joining a particular standard-setting alliance increases with the size of the alliance and decreases with the presence of rivals in the alliance, especially close rivals. The predicted alliance configurations are simply the Nash equilibria, i.e., those sets of alliances for which no single firm has an incentive to switch to another alliance. We illustrate our theory by estimating the choices of nine computer companies to join one of two alliances sponsoring competing Unix operating system standards in 1988.

Keywords: standardization; alliance; computer industry; Unix (search for similar items in EconPapers)
Date: 1995
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