The majority of global commodity chain analysis is concerned with producer firm upgrading, because it is held to engender local-level development. I put special emphasis on arguing that the gains from the past constitute a switching cost into the future, and thus, the criteria for defining the choice of a standard as a market failure changes. Moreover, results tell that a less-efficient standard might still yield an optimal equilibrium given that it spends a long time as the sole alternative.
I analyze this issue from a Cost-Benefit perspective, and propose a new model where I introduce time as a key variable to argue that, the longer a standard prevails without competitive alternatives, the harder it becomes to change it. Often, it may be possible to switch from standards, however, sometimes the chosen standard is “locked-in”, because of the existence of a big pool of adopters and the creation of important technologies around the standard, causing a market failure. This inferior choice hinders society’s benefits from adopting it, in com- parison with an alternative that would have been more beneficial. Therefore, we claim that even if lock-ins exist, they pose no problems as innovative market participants have the opportunity to introduce new business models.įor several decades there has been a widely held discussion whether society has been “trapped” into a “bad” choice of standard or, more formally, an inferior equilibrium because of an inefficient -and stochastic- adoption process. We suggest that this phenomenon causes only temporary harm, and lock-ins could be overcome by Schumpeterian creative destruction. We give several examples with inferior market leaders. We demonstrate that the missing consideration of the status quo bias in previous studies leads to the rejection of the QWERTY phenomenon, which means that independent of the quality offered by a business or service the pure moment of who reaches the customer first, establishes a status quo from which it is hardly possible to escape. In this paper, we investigate this debate.
The opposite group emphasises the importance of network effects, which can lead to lock-ins in inferior situations or being stuck in a bad equilibria accordingly, also known as the QWERTY phenomenon. Consequently, an inferior market player should not persist. One camp argues that the higher quality of a product or service exerts a major influence on its market success.
Does quality always win? Looking at the critical drivers of success in and efficiency of high-tech markets, two contrasting perspectives exist in the academic sector.