移动通信行业的产业融合

Industry Convergence and the Transformation of the MobileCommunications System of InnovationElmar Gerum, Insa Sjurts, Nils StieglitzElmar Gerum, Philipps-University Marburg, Department of Business Administration and Economics, Universitaetsstr. 24, 35032 Marburg, Germanygerum@wiwi.uni-marburg.deInsa Sjurts, HMS Hamburg Media School, Finkenau 35, 22081 Hamburg, Germanyi.sjurts@hamburgmediaschool.deNils Stieglitz, Philipps-University Marburg, Department of Business Administration and Economics, Universitaetsstrasse 24, 35032 Marburgstieglitz@wiwi.uni-marburg.de(corresponding author)FIRST DRAFT07/19/2004Please do not quote. Comments very welcome.Abstract: The mobile telecommunications industry experienced fast and largely unexpected growth during the last decade. Rapid innovations have characterized industrial dynamics, leading to a transformation of the market structure of the mobile communications industry and changes in the business strategies of key actors. The paper explores the significance of industry convergence for understanding the evolution of the mobile communications industry and its sectoral system of innovation.JEL-Codes: L22, L63, O31, O32Keywords: Innovation, industry convergence, sectoral system of innovation, mobile communications, industrial dynamicsThe mobile telecommunications industry experienced fast and largely unexpected growthduring the last decade, developing from a small niche market to an integral part of the “newdigital economy” (Christensen/Maskell 2003). Rapid innovations have characterized its evolution, leading to a transformation of the market structure of the mobile communications industry. For example, third-generation wireless access technologies have just begun to be introduced in the marketplace, while fourth-generation technologies are already at thedrawing board. ‘Smart phones’ may radically alter the dominant design of terminal devices,while network operators launched successful new mobile services like NTT DoCoMo’s i-Mode or the Multimedia Messaging Service (MMS). Because of these diverse innovations in technologies, goods, and services, the mobile communications industry is said to beconverging with the consumer electronics, the Internet services, and the informationtechnology industry.Traditional theories and frameworks developed in the strategic management andindustrial organization literature are often a blunt tool to capture the dynamics of changing industry structures (Li, Walley 2002; Krafft 2004). Porter’s (1980) widely used 5-Forces framework may be a good starting point for understanding the eventual impact of new technologies, goods, and services on traditional market structures and value chains, but itutterly fails to analyze and explain the emergence and diffusion of innovations (Stieglitz2004). This severely limits its usefulness for informing management practice and its value astool for strategic analysis in highly dynamic industries. Furthermore, while industryconvergence is a ubiquitous concept to describe industry evolution in telecommunications and other industries, its precise meaning often remains vague (Katz 1996). If industryconvergence is to be more than a popular buzzword, the concept needs more analytical clarity.In our paper, we try to deal with these two problems. Firstly, we make use of thesectoral system of innovation framework, which originated in evolutionary economics, toanalyze innovations and industry dynamics in mobile communications, and expand it into atool for strategic management. Secondly, we draw on the taxonomy developed by Stieglitz (2003) to sharpen the concept of industry convergence and apply it to the mobile communications industry. The taxonomy distinguishes four types of industry convergencethat have different ramifications for industry dynamics and business strategies. We show thatthese types of industry convergence shaped the past and present evolution of the mobile communications industry at different times and for different actors, and that industry convergence remains an essential concept to understand the future prospects of the industry.The paper is structured as follows. Section 1 introduces the general framework ofsectoral system of innovations, which forms the theoretical backbone of our discussion of the mobile communications industry. In section 2, we give a brief overview of the industry convergence taxonomy. In the rest of the paper, we use the taxonomy to analyze changes inthe mobile communications industry. Section 3 explains the emergence of wireless digital standards through a process of technological convergence and its impact on the mobile communications system of innovation. Section 4 outlines the coming of the mobile Internetand the subsequent convergence of mobile communications and Internet services. Section 5shows how new access technologies emanating from a neighboring industry opened up new technological opportunities in mobile communications, while section 6 provides a look atproduct convergence in terminal devices. Section 6 offers some final conclusions.1. Sectoral systems of innovationThe sectoral system of innovation approach has been developed in evolutionary economics to provide a framework for studying the forces that shape the creation and diffusion ofinnovations in industries. Malerba (2002, p. 250) offers the following working definition of a sectoral system of innovation: “A sectoral system of innovation and production is a set of newand established products for specific uses and the set of agents carrying out market and non-market interactions for the creation, production and sale of those products. A sectoral system has a knowledge base, technologies, input and an existing, emergent and potential demand”.1 Very broadly, the actors of a sectoral system of innovation consist of firms, non-firm organizations (e.g. regulatory bodies, universities, or standard committees), and individuals (e.g. consumers, entrepreneurs, scientists). The relationships and interactions between these actors can be conflicting (e.g. competition), complementary, or a combination of the two (‘coopetition’). In the strategic management literature, Brandenburger and Nalebuff (1995) captured these basic relationships between strategic actors in the “value net” (see figure 1).Figure 1: The generic value net. Source: Adapted from Brandenburger, Nalebuff (1995), p. 60An Schumpeterian conception of competition and industry dynamics underlies the sectoral system framework. To sustain long-term competitive advantages, firms are constantly forced to create and bring to market innovations. Uncertainty about the consumers’ preferences but also about the possibilities and limitations of new technologies characterizes the management of innovations. Thus, trial-and-error and the interactions of the supply side (creation of innovations, variety) and the demand side (selection of innovations) shapes innovations, and the resulting learning processes of firms about technologies and consumers’ preferences constitute important drivers of industrial change. The creation and diffusion of innovations in a sectoral system is heavily influenced by its technological regime. The technological opportunities, the degrees of cumulativeness of technological knowledge, the sources and characteristics of relevant knowledge, and the appropriability conditions characterize a technological regime.The technological opportunities influence the rate and direction of innovations in a sectoral system. High technological opportunities enable rapid innovations, signified by continuous introduction of new products and processes. High technological opportunities may allow for the continuous entry of new innovators, especially if established firms fail to exploit these opportunities. The opportunities of a new technology tend to decline over time, as the technology matures and its refinement follows a well-defined technological trajectory (Dosi 1982). The direction of innovations depends on how firms search and exploit the technological opportunities. In case of demand-pull innovations, the known and emergent1 Carlsson, Jacobsson, Holmen, Rickne (2002) and Malerba (2002) offer a more complete and thorough theoretical discussion of sectoral systems of innovation.preferences of buyers and consumers directly influence the innovation strategies of the firms. Technology-push innovations, on the other hand, are driven by the technical possibilities of new technologies, and firms often have to actively develop a demand for new products.The technological opportunities a given firm may exploit depend on its technological competencies. Firms need to possess or have access to the necessary technical knowledge and skills to successfully seize the opportunities and innovate. Thus, because of firm-specific differences in the technological competencies, firms in the same sectoral system often exhibit a different menu of innovative opportunities (Teece, Rumelt, Dosi, Winter 1994). The cumulativeness represents a degree on which the generation of new knowledge builds upon the current technological competencies of the firm. Incremental innovations draw on existing competencies and therefore tend to reinforce the competitive positions of established firms. Tushman and Anderson (1986) therefore called this type of innovation “competence-enhancing”. Radical or “competence-destroying” innovations, in contrast, exhibit a low cumulativeness of knowledge, since new competencies are needed to exploit the opportunities and existing technological competencies become, at least in part, obsolete. Radical innovations in combination with high technological opportunities often open a window of opportunity for the successful market entry of new firms, because incumbents may fail to adapt their technological competencies.Internal sources for new knowledge are mainly feedbacks from an industry’s own technological advances and learning.2 Suppliers and consumers may both play an active part in the creation of new knowledge (Hippel 1988). Advances in scientific understanding and technique, usually provided by public actors as universities and government-sponsored research organizations provide an additional important external source of new knowledge. Linkages between private and non-private organizations are required to develop these advances into new technological and business opportunities. New knowledge may also originate in other industries that are not part of the sectoral system of innovation and which constitute external sources.How firms gain access to new knowledge depends on its transferability and its means of transmission (Malerba, Orsenigo 2000). Codified scientific knowledge can be easily transferred via academic journals, conferences, etc. Tacit knowledge usually has to be developed internally through learning processes. While codified knowledge often diffuses rapidly in a sectoral system of innovation, the lower accessibility of tacit knowledge restricts its dispersal and is a major reason of persistent differences in the competencies of firms. Firms choose cooperative strategies like strategic alliances or corporate networks to gain access to tacit knowledge and use it together. Knowledge may also be transferred via product modules as in the case of off-the-shelf technologies (Baldwin, Clark 1997). In this case, the technology users need to know how to use these modules, but not how to produce them. In other words, firms need system integration capabilities to integrate various modules for a final product (Pavitt 2003).Lastly, the appropriability conditions influence how innovators protect innovative rents from knowledge spillovers and imitations. For example, patents and other intellectual property rights increase the appropriability of innovations by restricting the use of technological knowledge by competitors. Likewise, tacit knowledge (e.g. trade secrets) restricts the diffusion of knowledge and increases the appropriability of innovations. Even if technological knowledge diffuses quickly and is not protected by intellectual property rights, complementary assets of innovators (Teece 1986) like brand reputation, efficient manufacturing plans, or distribution channels provide important barriers to imitation.2 Klevorick/Levin/Nelson/Winter (1995) give a detailed overview of the sources of technological opportunities in different sectoral systems of innovations.Taken together these four conditions of the technological regime shape the creation and diffusion of innovations in a sectoral system and, ultimately, the business strategies of its actors.2. Types of industry convergenceIndustry convergence constitutes an important concept to understand technology and product evolution in general, not just digital products (Adner, Levinthal 2001). Stieglitz (2003, 2004) differentiates between four types of industry convergence (see table 1). These types of industry convergence differ in their impact on industry dynamics and business strategy.substitutes complementstechnological convergence technologicalsubstitutiontechnologyintegrationproduct-based convergenceproductsubstitutionproductcomplementarityTable 1: Types of Industry Convergence. Source: Adapted from Stieglitz (2003), p. 182Technologically convergent industries produce different goods and services with similar technological competencies. Two generic types of technological convergence are possible. The first type involves a new technology replacing distinct technologies in established industries (industry convergence by “technology substitution”).3 General-purpose technologies that can be applied to various industries usually trigger technology substitution. Since general-purpose technologies are applicable to a range of industries, firms are able to specialise in their commercialisation. This often leads to a process of vertical disintegration and the creation of supplier industries upstream from traditional markets (Arora, Fosfuri, Gambardella 2001). Since the 1960s, semiconductor technologies have been widely diffusedin many established industries such as the automotive, the computer, the consumer electronics, and telecommunications industry. Older, analogue technologies have become and are still being replaced by semiconductors. During the same time, a specialised semiconductor industry emerged.In the second case of technological convergence, various technologies previously associated with different industries are fused or integrated, thereby giving rise to entirely new product markets (“technology integration”). The integrated technologies are complementary, because their interactions allow firms to develop new products. Therefore, following Tushman and Anderson (1986), while technology substitution is competence-destroying, technology integration is competence-enhancing. Associated with technology integration are two interdependent learning processes involving product development and the underlying‘fusion’ of technologies. These trial-and-error processes represent the key drivers of industry dynamics in technology integration. The emergence of the handheld computer industry represents an example for technology integration. Technologies from the computer, the consumer electronics, and the telecommunications industries were integrated to produce the first handheld computers in the early 1990s. In the handheld computer industry, the start-up3 Substitution and integration of technologies or products also take place within a single industry and without any associated industry convergence. However, we shall only use the terms as related to industry convergence. Hence, to keep things simple, we will speak of technology substitution instead of ‘industry convergence by technology substitution’ and so on.company Palm was able to draw the right conclusions from the two learning processes. Besides controlling key technologies, Palm was able to access and integrate missing technological capabilities through off-the-shelf products and, to a lesser extent, strategic alliances. Despite the widespread entry of established firms from computers, telecommunications and consumer electronics, Palm emerged as the dominant firm.Industries characterized by product-based convergence offer new substitute or complementary product functions (Greenstein, Khanna 1997). In the former case, an established product from one industry evolves to integrate product features that are similar to those of another product in a different industry (“product substitution”). Firms pursue this type of product convergence by expanding their established products with new features from other industries. They tend to build on their existing technological and complementary capabilities in developing hybrid products. An example of convergence by product substitution is the dynamic relationship between the markets for mainframes and minicomputers during the 1970s (Bresnahan, Greenstein 1999). Mainframes were used for general purposes, while minicomputers were employed for conducting highly specialized and repetitive single tasks. Accordingly, they differed substantially in terms of product characteristics and were considered distinct product markets. Technological innovations in semiconductors led to increased computing power for minicomputers that allowed their employment for more complex, general-purpose tasks.In the case of industry convergence by “product complementarity”, two formerly unrelated products develop into complements, which create a higher utility for its users if used together. We call this type of product-based convergence ‘product complementarity’. Because standards enable the complementary use of products, standardization is the key driver of this type of industry convergence. For example, Internet technologies sparked a process of industry convergence through product complementarity. It was only after the commercial diffusion of the Internet that computers and fixed-line telephone networks came to be widely perceived as complementary products in both business and households.In the rest of the paper, we show how these types of industry convergence relate to the evolution of mobile communications industry and discuss how they have shaped the mobile communications system of innovations. Specifically, industry convergence by technological substitution led to the emergence of second-generation digital access technologies like the dominating GSM standard. Product innovations as NTT DoCoMo’s i-Mode service or the European WAP standard started a convergence process by product complementarity by enabling the mobile access to the Internet, which may pick up steam through the diffusion of third-generation generation access technologies. W-LAN or Wi-Fi represents an alternative, competing access technology that emanated from an industry formerly not associated with the mobile communications system of innovation, the computer networking industry. Wi-Fi came about through a process of technology integration of networking technologies with radio technology. Lastly, these developments influence product innovations in terminal devices. Mobile phones integrate more and more product features from other industry as digital photography, handheld computers, or video gaming. The result is an industry convergence by product substitution in mobile terminal devices.3. Industry convergence by technology substitution: the establishmentof the GSM standardThe digital GSM (Global System for Mobile Communications) standard was developed during the 1980s.4 At least in Europe, equipment suppliers, network operators, terminal device suppliers, and consumers represented the key private actors of the mobile communications system. Figure 2 shows the value net of the system of innovation. Important public actors that played a prominent role in establishing GSM as a pan-European standard were CEPT and later ETSI.5Demand-pull pressures characterized the development that eventually culminated in GSM. The modestly successful first-generation standards only allowed for very restricted international roaming, offered poor voice quality, and did only accommodate a limited number of subscribers. Thus, network operators were looking for new technologies to extend the market and offer a higher product value to their customers. To create second-generation access technology, the equipment suppliers looked to semiconductor technology for meeting the network operators’ demand. Semiconductor technology has proven to be a general-purpose technology, which made a substantial impact in automotive, computers, consumer electronics, and many more industries (Pavitt 1987). In mobile communications, semiconductor technology created the technological opportunities to develop a new access technology, which relied on the digital transmission of signals. Semiconductors made its first inroads into telecommunications during the mid-1960s (Duysters 1996). First-generation mobile access technologies introduced during the early 1980s relied on digital switches, but transmission of radio signals still was analogue.New technological competencies were required to exploit the technological opportunities generated by semiconductor technologies and to develop digital access technologies. The radio base station of wireless networks became technologically more4 We do not attempt to give a full overview of the emergence and development of second-generation mobile access technologies, only insofar as it relates to industry convergence. More detailed studies, which also discuss standards in Japan and the USA are provided by Kano (2000), Steinbock (2003), and Hommen, Mannien (2003).5 Funk (2002) analyzes the committee-based standardization and the interactions between private and public actors that led to GSM.complex, requiring technical competencies in new technological fields like semiconductor, computer hardware, and especially software.6 While equipment suppliers could draw on their technological competencies acquired in the development of first-generation analogue technologies, digital technologies required new technical skills and even made some of the traditional competencies obsolete. Thus, the cumulativeness of new knowledge was limited and the convergence by technology substitution proofed to be competence-destroying. Because of technological interrelatedness, the competence-destroying nature of digital technologies also applied to terminal devices. Mobile phones based on the GSM standard became technologically more complex, requiring the same broad technical skills needed for radio base stations. Table 2 shows the technology evolution of mobile phones in the case of Ericsson, with digital technologies (“computers”) as a new technological field for GSM.Product Generation (mobile phones)Number of Technologiesold new total obsoleteR&DCosts(base=100)%age ofTechnologiesAcquiredExternallyMainTechnicalFields(a)No. ofPatentClasses(b)NMT-450 n.a. n.a. 5 n.a. 100 12 E 17 NMT-900 5 5 10 0 200 28 EPM 25 GSM 9 5 14 1 500 29 EPMC 29 [n.a.] =not applicable(a) “Main” > 15% of total engineering stock. E = Electrial; P = physics; K = Chemistry; M = Mechanical, C= Computers(b) Number of International Patent Classes (IPC) at 4-digit levelTable 2: Increasing technological diversity in Ericsson’s mobile phones. Source: Adapted fromGranstrand, Patel, Pavitt (1997), p. 15To meet these technological challenges, the equipment suppliers refined and widened their technological competency base through higher investment into research and development, the acquisitions of competing firms with complementary technological competencies, and a greater reliance on international technology alliances with other private actors.7 Cross-licensing became an important instrument to gain access to missing technologies, and provided an convenient way to keep new firms from entering the industry (Bekkers, Verspagen, Smits (2002). Alcatel, Ericsson, Motorola Nokia, and Siemens, all major patent holders, emerged as the key equipment suppliers for the GSM standard by the mid-1990s.These firms increasingly pursued a multi-technology strategy: They diversified their technological competencies to meet the requirements of the more complex innovation process in mobile communications, while scaling back their activities in other industries.8 The refocusing allowed the equipment suppliers to concentrate on the very demanding competitive landscape of mobile telecommunications. Their broad technological competencies and the technical interrelatedness of network equipment and terminal devices put them in a competitive position to not only dominate the equipment markets (base stations, switches) but the terminal device market as well, because it allowed them to apply their newly acquired technological skills in digital technologies to both markets. The cross-licensing agreements strengthened the appropriability conditions in both markets by preventing many competitors, 6 According to Steinbock (2001), p. 110, the GSM project was dubbed “the Great Software Monster” by Nokia engineers.7 McKelvey, Texier, Alm (1998) analyze Ericsson’s build-up of technological capabilities, while Palmberg, Lemola (1998) and Sadowski, Dittrich, Duysters (2003) chronicle Nokia’s entry into mobile communications and the internal development of internal technologies.8 See Palmberg, Lemola (1998) for the case the Nokia. Granstrand (1998) provides an theoretical discussion of the multi-technology firm, while Gambardella, Torrisi (1998) show that the multi-technology strategy is a common response to industry convergence by technological substitution.especially the Japanese, from entering the industry until the late 1990s. Thus, the leading equipment suppliers also came to dominate the terminal device market by the mid-1990s (see table 3). Due to an uneven rate of change in the technologies underlying the components of a mobile network – base stations, switches, terminal devices – and strong interdependencies between components, the tight coupling provided by vertical integration of research and development, production, and marketing became the prevailing organizational structure of equipment suppliers (Davies 1999; Brusoni, Prencipe, Pavitt 2001).The development and introduction of GSM saw also a diminishing role of network operators in the innovation process, with the sources of new technical knowledge gravitating towards the equipment suppliers. While network operators had played an important role as innovators and system integrators in analogue standards, they lost this position during the transition to GSM. Their main contribution increasingly was to create and expand markets for mobile communications. Hence, network operators concentrated on building new competencies for operating a mobile network and marketing mobile telecommunications services. Brand reputation, customer service, or efficient billing processes became more important for the commercial success of operators than technical expertise. This process of vertical specialization between network operators and equipment suppliers started in the early stages of GSM standardization and was largely completed by the mid-1990s.9Equipment Supplier Market share (%)switchingMarket share (%)base stationsMarket share (%)mobile terminalsRank on total GSMmarketEricsson 48 37 25 1Nokia 14 22 24 2Siemens 21 2 9 3Motorola 1 13 20 4Alcatel 10 10 6 5Lucent 2 4 6Matra 2 3 7Italtel 0 5 8Nortel 1 0 3 9Philips 0 2 10Table 3: Equipment suppliers market share of the 33 largest GSM networks in Europe (1996), world-wide market share of GSM terminals (1996). Source: Adapted from Bekkers, Verspagen, Smits (2002), p. 174 Thus, technological substitution and the adoption of digital technologies based on semiconductors had far-reaching consequences for the mobile communications system of innovation and the division of labour between its key actors. The technological trajectory established with GSM shaped innovations for all actors in the value net, with voice communications being the driving force. In terminal devices, portable handsets were established as the dominant design and continuing miniaturization allowed for both cost reductions and quality improvements throughout the 1990s (Funk 2002). In network equipment, vendors improved quality of service and network management capabilities, while operators heavily invested into network coverage and introduced new products like pre-paid cards to extend the market.In the later 1990s, despite rapid growth, many equipment suppliers and network operators began to realize that the market for mobile voice communication services would be saturated in a few years. Witnessing the stunning success of the Internet in fixed-line telecommunications and of simple data transmission via the Short Messaging Service (SMS)in mobile communications, mobile multimedia data services were identified as a new growth opportunity for the industry. This shared industry vision of the “mobile Internet” led to two9 See Rao (2001), Holmen, Mannien (2003), pp. 117-119, Fransman (2003), pp. 216-233, Krafft (2004). Japan’s network operator NTT DoCoMo was an important exception to this trend.。