Government Sponsored Standardization As Collective Action

Published Date: 02 Nov 2017

Abstract

Through the collective action lens, this paper presents a case study that China developed and deployed a third generation (3G) mobile telecommunications system. The findings advance current understanding of the mechanisms of government-sponsored standardization that aims to compete with the established rivalries. Theoretical propositions concerning methods of government intervention in the development and diffusion of technology systems are derived. Specifically, government support through state-controlled firms is seen to ensure the success; scoping tactic and moral suasion are critical for standard development and standard diffusion, respectively. Practical implications for the roles of the government in standardization are given.

Keywords: 3G, China, collective action, government-sponsored standardization, mobile telecommunications, standard

1 Introduction

In recent years, system standards have become increasingly important in the telecommunications and information technology industry. A system standard such as the cellular communications standard defines the overall architecture of a technology system, accompanied by a set of interface specifications among its component sub-systems (David and Greenstein, 1990). At the micro level, the owners of a standard can "capture the definition of the technological trajectory, the direction and, to some degree, the rate at which future technological progress is made" (Steinmuller, 2005, p. 26). A firm controlling a standard has an advantage in the competition following the application of this technology in the market (Funk and Methe, 2001). At the macro level, standard forms the basis of market development. For example Europe, the US and Japan adopted different second generation (2G) and third generation (3G) systems and consequently followed alternative market development trajectories (Fjermestad et al., 2006; Henten et al., 2004).

Due to the significance of system standards for market growth and firm competition, standardization has become "a critical research frontier for information systems research" (Lyytinen and King, 2006, p.405). More and more standardization research appears in mainstream information systems journals. However, two research gaps exist in the extant standardization literature, which this paper aims to address. First, a complete standardization process consists of two stages - standard development and standard diffusion, which are different in nature but logically connected (David and Greenstein, 1990). The success of a standardization initiative means that a standard is not only developed but also deployed in the market successfully. Standard adopters sometimes would like to involve themselves in standard development rather than wait until the standard is ready so as to understand its technology properties and business opportunities and further make informed decision of when and how to adopt it. Meanwhile, standard developers are often active players during standard diffusion in order to harvest their R&D investments. In fact, their participation in the standard diffusion is vital in converting a new technology into market services (Funk and Methe, 2001). Both standardization stages present different challenges, which need to be addressed so as to ensure the success of a standardization initiative (Markus et al., 2006). Yet, most people examine either standard development or standard diffusion, but rarely both, though we need to analyze the whole standardization process and understand the dependencies between its different components (Lyytinen et al., 2008).

Second, in recent years, we have witnessed an increased involvement by states in initiating and facilitating technology standardization (Lee and Oh, 2008). In the literature, it is recognized that governments can motivate multiple technology players with diverse interests and capacities to participate in standardization processes and ensure that they work together efficiently (Schmidt and Werle, 1998; Tassey, 2000). The governments can also act as representatives of broader user constituencies. Specifically, for some standardization projects influencing potentially national economies and the future of society, like 3G mobile standards, the governments may observe the need to intervene and ensure that the standardization efforts will achieve socially and economically desirable outcomes (Kitcat, 2004). The government can aim to protect the national interests in international initiatives of standard setting (David, 1994). While the government is generally recognized as an important player in standardization, little is known about methods of government intervention and their effects in standardization initiatives (Markus et al., 2006).

This paper seeks to add to these lines of standardization research by analyzing the Chinese government’s efforts to develop and deploy a 3G standard through the lens of collective action (Markus et al., 2006; Olson, 1965). Our research question is: how can the government intervene in the standardization process and deal with the different but related challenges in standard development and standard diffusion? With the largest mobile market that has been growing at one of the highest rates in the world, China’s strategy of 3G system standardization is of significant interest to both technology innovation scholars and practitioners in the telecommunications market (Harwit, 2007). It adds to our knowledge of standardization in developing countries, which have started to become prominent players in the technology arena (Lee and Oh, 2008).

Collective action theory was first used by Weiss and Cargill (1992) to examine the joint efforts of different vendors in the standardization of information technology products. In recent years it has started to attract the attention of some information systems scholars, as represented by the work of Markus et al. (2006) on the development and adoption of vertical information systems standards in the US mortgage industry with users as key players. These two works view standardization of information technology products and vertical information systems as an ongoing negotiation process dominated by vendors and users, respectively. This paper extends the application of collective action theory to government-sponsored standardization of technology systems that aims to compete with the established rivalries, and focuses on the role of government in standardization as collective action.

The method of Markus et al. (2006) is particularly instructive for us and will be used to structure this case study. Accordingly, we will describe the heterogeneity of actors in terms of their interests and capabilities in 3G systems as the sources of challenges to the government when organizing the standardization activities. We will further examine the tactics that the government has followed to solve them. Our case study will lead to theoretical reflections on the mechanisms of government-sponsored standard development and diffusion of technology systems from collective action perspective. Our findings advance the current knowledge of standardization as collective action, which we find cannot be applied to standardization of technology systems organized by the government.

The article is organized as follows. The next section introduces the technology background of cellular mobile systems. Section Three reviews research of the role of government in standardization. The fourth section explains our methodology and theoretical lens. The fifth and sixth sections outline the case study. The final section derives theoretical propositions on the methods of government interventions in standard development and diffusion, and offers practical implications for government-sponsored standardization.

2 Mobile Telecommunications Standards and Standardization

In the past decades, mobile technologies and markets have undergone three generations of systems. The first generation mobile technology was available from the 1970s, but was replaced by 2G systems in 1980s, which have achieved success on the global scale. Global System for Mobile communication (GSM) became popular in Europe and many other countries. CDMA One (also called Narrowband CDMA) standard was the dominant standard in North America and parts of Asia. In the request for supporting higher data rates and better data services via mobile phones, in 1999 the International Telecommunications Union (ITU) approved three 3G standards. All based on CDMA technology, they are commonly known as Wideband CDMA (WCDMA), CDMA2000 and Time Division Synchronous CDMA (TD-SCDMA). WCDMA and CDMA2000 are backwards-compatible extensions to GSM and CDMA One, respectively. Thus, their standardizations were supported by the incumbent 2G market players with vested interests in GSM and CDMA systems, respectively. The EU Parliament mandated WCDMA as the European 3G standard; CDMA2000 is used mainly in North America, thus is called American version of 3G standard (Fjermestad et al., 2006; Henten et al., 2004).

TD-SCDMA is the Chinese version of 3G standard. In contrast to WCDMA and CDMA2000, TD-SCDMA is incompatible to any existing 2G standards. Being path-breaking in nature, TD-SCDMA standardization carries higher risks and involves more technological and market uncertainty when compared to alternative 3G systems (David, 1994; David and Greenstein, 1990). In such situations, only the Chinese government could take the lead in the standard development and diffusion. This was made possible by the national policy of China that supports indigenous technology innovation (Suttmeier, 2005). Indeed, the experience that China has incentivized the state-controlled mobile industry to invest in TD-SCDMA standardization presents a strong case for us to understand the mechanisms of a government-sponsored standardization process.

3 Perspectives of Technology Standardization Research

Scholars have studied the role of government in standardization from different perspectives (Hawkins et al., 2003). The economics tradition - which in mid-1980s initiated standardization research as a popular topic (Tilson, 2008) - acknowledges the role of standards in achieving technology providers’ economic goals. They postulate that the market makes adoption decisions based on the anticipated value of a product or service. To them, the decision of whether to join a standardization project is based on the network effects that this technology may present, and the strategy for standard diffusion is to lock-in customers and utilize the effects of network externalities (Katz and Shapiro, 1986; Maicas et al., 2009). Overall, the economics literature largely ignores technological, social, and institutional forces that shape standard creation and adoption. Economists view government as a "blind giant" in attempting to influence standards for the public good. It is supposed that the government can’t foresee the future impact of its decisions on the path of technology development, and thus its involvement in standardization should be restricted, while private committees should be the main force of standardization (Blind, 2004; David, 1987).

In a broad sense, standardization falls in the area of technology diffusion and adoption. The basic assumption here is that people will adopt an innovation if they believe it can enhance their utility (Wolfe, 1994). Researchers often explain diffusion using a small set of factors, like the relative advantage, compatibility, and complexity of the technology as well as management support, market size and centralization (Tornatzky and Klein, 1982). In this tradition, abundant research has studied the diffusion and adoption of technologies and services in different countries, for example mobile data services in Korea (Kim and Han, 2009), and mobile TV in Europe (Jarvenpaa and Loebbecke, 2009). However, technology standards, especially standard development, have not become the research target, whereas the role of the government in technology diffusion and adoption is largely sidelined.

The institution school is considered useful for understanding the environment of technology innovation. Institutions are categorized into three pillars - regulative, normative and cognitive ones (Scott, 2001). A lot of scholars focus on the role of regulative institutions, of which government authorities are the most important one. Edquist (2003), for example, reports on changes in European mobile markets as a result of the interactions among institutions at national and EU levels. King et al. (1994) conceptualize a framework for analyzing the mechanisms for different kinds of government institutions to intervene in technology innovation. According to Tilson (2008), this institution model has been widely used to analyze the diffusion of commercial technologies like enterprise information systems (Gosain, 2004), wireless services (Knutsen and Lyytinen, 2008), and products e.g. mobile phones (West, 2000) but not standard development issues.

In recent years, people have been interested in understanding standardization activities from a sociological perspective. In particular, actor-network theory is used to analyze either standard development or standard diffusion, but not both. Lee and Oh (2006) describe wireless standard setting in an international context where firms, industry consortia and governments collaborate and compete in complex ways of actor-network creation. Walsham and Sahay (1999) explain the deployment of geographical information systems in India as a result of interest alignment among the government, users and technology providers. Lyytinen and King (2002) conceptualize mobile industry changes as the result of dynamic interactions among actors pursuing their own standard diffusion strategies. The actor-network is categorized to three domains - innovation space, marketplace, and regulatory regime. The government is specifically defined as one group of actors - the regulative domain. The resulting model provides a high-level view of the actor-network and actor-network building in mobile industries, which has been referred broadly by others to describe mobile standard diffusion in different countries, such as Korea (Yoo et al., 2005) and Pakistan (Gao and Rafiq, 2009).

The collective action theory of sociologist Olsen (1965) has been applied by few scholars to analyze standardization mechanisms. It argues that standardization involves two linked but different collective action dilemmas in standard development and standard diffusion; Successful standard consortia must encompass heterogeneous groups of user organizations and technology vendors without fragmenting. Weiss and Cargill (1992) draw upon collective action theory to analyze standardization of information technology products in which technology vendors are the key players. Markus et al. (2006) extend its usage to the standardization of information systems coordinating among organizations within or across vertical industry sectors, which is led by heterogeneous groups of user organizations instead of vendors. Several tactics have been identified that should be tailored to suitably resolve the specific dilemmas in the development and diffusion of vertical information systems, which include governance, the leading role of government-sponsored enterprises (GSEs), scoping decision, intellectual property right (IPR) agreement, and moral suasion.

To conclude the literature review, here we assess the extant theories on standardization mechanisms mentioned above. The economists describe firms’ participation in a standard setting project and adoption of a standard as driven by seeking economic goals, rather than by technological, social, and institutional factors. The institution school focuses on the institutional environment rather than standardization actors. Particularly, the framework of King et al. (1994) is widely used to analyze the role of authorities in promoting technology diffusion, but not standard development process, especially that of complex technology systems. Actor-network perspective offers a set of structured languages for describing either standard development or standard diffusion, rather than a complete standardization initiative, as a process of actor-network formation and maintenance. Moreover, it fails to go deep to disclose the relevant challenges that the standardization organizers face in this process, and identify the solutions for them to address the challenges.

4 Theoretical Lens and Research Method

4.1 Theoretical Lens

We select collective action theory as our theoretical lens for its strength in analyzing the challenges in a complete standardization process, i.e. the development and diffusion of a technology system, and identifying solutions for addressing them. The basic arguments of collective action literature include that, in the standard development stage and diffusion stage, the heterogeneity of actors and their interests and resources is prone to challenges, which may vary but are interrelated. Accordingly, a set of tactics, which can be used by the standardization organizers to tackle these challenges to ensure the success of a standardization initiative, are proposed. Collective action perspective suits our purpose of understanding the role of government in standardization of technology systems, particularly the methods of government interventions in such a process.

4.2 Methods of Data Collection and Data Analysis

This research is designed as a longitudinal case study (Leonard-Barton, 1990). China’s experience of developing and deploying the 3G standard will be outlined and analyzed. For the purpose of data collection, the authors of this article have firstly been engaged in a substantial number of interviews with the main players in the Chinese mobile telecommunications market, including technology vendors, research institutions, operators, and government authorities. In total we have interviewed 29 executives and officials from these kinds of organizations with intensive interests in 3G technology and market (see the Appendix for a summary of interviews with names of interviewees being disguised). Second, we use Chinese archives, including news reports in official newspapers like China Daily and People’s Posts & Telecommunications, and speeches of ministers and national leaders. We also draw upon English data sources such as Financial Times and academic publications on technology innovation, particularly that of TD-SCDMA, in China. Consequently, we are able to set up a data base and develop a process-oriented narrative of TD-SCDMA case, which makes a "story" of about 5000 words.

We have devised an overall data analysis and presentation strategy, which should fit the nature of our research questions and theoretical lens, to code the narrative. First, we identify key actors and analyze their interests in, and resources for, TD-SCDMA standardization. We then articulate the challenges in TD-SCDMA development and diffusion as a result of heterogeneity of actors’ interests and resources. Finally, we draw upon the terminologies by Markus et al. (2006) to document how the government has used different tactics to solve these challenges, including governance, the leading role of GSEs, scoping decision, IPR agreement, and moral suasion. Theoretical propositions will be developed following the research themes of how the government may address the different but interrelated challenges in standard development and standard diffusion.

5 TD-SCDMA Standardization in China

In this part we describe the process of TD-SCDMA standardization in China. Critical events are arranged in a sequential order, as summarized in Table 1.

-------------------------------------------------------------------------

Table 1 TD-SCDMA standardization process

--------------------------------------------------------------------------

In recent decades, China has adopted a national policy of indigenous innovation, which aims to support Chinese firms to compete with foreign technology giants in key technologies (Suttmeier, 2005). As a part of this policy, in mid-1990s when global mobile market was booming, China set 3G mobile technologies as an innovation area of national investment (Yu, 2011). This was meant to change the landscape that foreign firms and technologies have dominated the Chinese telecommunications market. The Ministry of Posts and Telecommunications (MPT) ordered its affiliate the China Academy of Telecommunications Technology (CATT) to lead the initiative of 3G standardization (Zhang, 2008). In 1995, Xinwei Telecom Technology Co., Ltd. was formed as a joint venture of CATT and Cwill, a technology set-up registered in the US. Its mission was to explore the possibility of incorporating SCDMA, a synchronous technology of intelligent antenna owned by Cwill, into the 3G standard (Marukawa, 2010; Tsai and Wang, 2011).

In July 1997, MPT formed the 3G Transmission Technology Assessment and Coordination Group (TTACG) responsible for selecting the signal transmission solution, another basic part of a 3G standard. A breakthrough in this work was achieved due to the participation of Siemens. Siemens, a giant of mobile technologies, had devoted its resources to the R&D of 3G technology. Unfortunately, its method of TD duplex signal transmission was not taken into account by the EU proposal of 3G standard to ITU. This turned out to be an opportunity for Chinese 3G standard developers (Marukawa, 2010; Meng and Yao, 2000).

Cwill and Siemens together offered a blueprint for the 3G standard of China. In early 1998, the R&D Team was established. Located in and chaired by CATT, the R&D Team consisted of experts from MPT and its affiliated research institutes, and vendors like Siemens. It was in charge of the mutual adaptation of TD and SCDMA technologies (Meng and Yao, 2000). Finally the draft TD-SCDMA standard was finished, which in June 1998 was submitted to ITU for evaluation by CATT on behalf of the Chinese government (Dong et al., 2006). In November 1999, ITU granted TD-SCDMA as one of the three international 3G standards (ITU, 2002; Yan, 2007).

From 2000, TD-SCDMA standardization entered the diffusion stage, which was overseen by the Ministry of Information Industry (MII) that replaced MPT as the result of national reform in the government system (Zhang, 2008). It restructured CATT to Datang Telecom, which as a state-controlled technology firm was more suited than CATT being a research institute to lead the test and operation of TD-SCDMA system (Yan, 2007). In October 2002, MII formed TD-SCDMA Industry Alliance (TDIA) consisting of key actors of TD-SCDMA diffusion. Its size expanded gradually, from the initial few leading domestic vendors like Datang, Potevio and ZTE etc. to finally 25 members, including 17 domestic firms and 8 foreign or joint venture firms (Tsai and Wang, 2011). Specifically, China Mobile joined TDIA in July 2008 (Liu, 2008), and started to commit to TD-SCDMA operation. Datang Telecom together with ZTE, Potevio and other TDIA members carried out rounds of "test - system improvement - test" on this China-born standard. It turned out to be a lengthy process reflecting the gradual engagement of important industrial actors in the industrialization of TD-SCDMA technology. In January 2009, when the test results showed that the pilot network based on available TD-SCDMA products could offer high quality 3G services, MII issued 3G operation licenses and kicked-off the Chinese 3G market. The dominant 2G operator China Mobile was ordered to run the TD-SCDMA system. Smaller rivals China Unicom and China Telecom received licenses for WCDMA and CDMA2000 operation, respectively. Since then, the Chinese 3G market started to roll out in a large scale, with TD-SCDMA taking the lead (China Daily, 2009; Marukawa, 2010; Nystedt, 2009).

6 Findings

Following the collective action method of Markus et al. (2006), in this part we first identify the key actors in TD-SCDMA standardization, and examine their interests in and resources maneovable to this initative. We then discuss the different challenges faced by the government in the development stage and diffusion stage due to the hetergenity of actors, and analyze the tactics available for the government to solve them.

6.1 Heterogeneity of Actors

A standard setting initative must accommodate a considerable heterogeneity of actors with complementary resources (Hanseth and Monteiro, 1997; Tassey, 2000). Particularly, the development and deployment of a 3G standard as a complex technology system need inputs from different technology vendors and developers owing key know-hows in antenna, core-network, wireless system, terminal, and chipset (Fjermestad et al., 2006), and mobile operators familiar with the market. These stakeholders of 3G technology and market can be categorized INto two groups - GSEs and private firms, which in general have various resources for and also different interests in China’s 3G standardization initative, as shown in Table 2.

------------------------------------------------------------------------------------------------

Table 2 TD-SCDMA standardization participants’ interests and resources

------------------------------------------------------------------------------------------------

As state institutes, CATT and Datang Telecom understood the strategic significance of indigenous 3G technology to China, and would be honored to lead the national initiative of 3G standardization. They looked forward to the national pride mounted on them for their leading role in successfully developing an international 3G standard and diffusing it in the Chinese market. The government would offer them its utmost support, and cover most of their budget on this effort. Other important GSEs included mobile technology vendors Potevio and ZTE. Their core business interest was to fulfil the revenue quota set to them by the government and to win competition in mobile equipment and network market. Naturally, they preferred WCDMA compatible to GSM that they had followed for years, to TD-SCDMA. Meanwhile, they hoped to use this national initiative of 3G standardization as a chance to replace the dominant position of foreign technology giants in China.

China had three state-controlled mobile operators. China Mobile and China Unicom operated GSM system, and China Telecom used CDMA One standard. They wanted to operate WCDMA or CDMA2000 system compatible to their incumbent 2G networks. Assuming it would be ordered to run TD-SCDMA system for its strong operation and marketing capability, China Mobile, owning two thirds of the 2G market, did not like to move to the 3G era soon but hoped to continue its dominance in the mobile market by offering 2G services. In contrast, China Telecom and China Unicom hoped the market might reshuffle soon, which would give them the opportunity of grasping some market shares from China Mobile. To the end, regardless of its original position, each GSE-type vendor or operator had to align its interests with that of the government when it pursued the national strategy of indigenous innovation, and support CATT and Datang Telecom in the 3G standardization initiative.

Private firms differed in their interests on 3G technology. On the one hand, Chinese firms led by Huawei had manufactured GSM-compatible products and were not interested in the revolutionary TD-SCDMA system. Most foreign technology giants did not like to see Chinese standards emerging and challenging their dominant position in technology. But these Chinese or foreign firms could not afford to ignore the huge interests of the Chinese 3G market, and would join TD-SCDMA development and diffusion if they were assured that this national initiative would succeed. The government needed to show its strong support of TD-SCDMA standardization to these private actors, and make efforts to translate their interests. On the other hand, some foreign firms were willing to collaborate with the Chinese government. For example, Cwill and Siemens expected that their proprietary smart antenna technology and signal transmission scheme, respectively, could be used as the basis of Chinese version of 3G standard.

In terms of resources, GSEs knew the Chinese mobile telecommunications market well. Chinese vendors have maintained a good business relation with Chinese operators as the technology users. In recent years, they have gained independent R&D capability, and have taken a significant share in the Chinese mobile equipment and network market (Soh and Yu, 2010). However, Chinese firms alone were not able to fulfill the task of standardization on a complex 3G system. They had to collaborate with foreign firms with strong capabilities and rich experience in standard development and commercialization.

6.2 Challenges and the Solving Tactics

The heterogeneity of actors was potentially detrimental to standardization success, and in the standard development and diffusion stages generated different challenges to the organizer (Weiss and Cargill 1992). For the TD-SCDMA case, in the development stage, the task was to deliver the standard proposal to ITU within the set timeframe and ensure that it would go through the evaluation. In the diffusion stage, the focus was to establish an industrial value chain for the commercialization and operation of TD-SCDMA technology. The problem was worsened by the technological property of TD-SCDMA set up in the R&D stage - TD-SCDMA was not compatible to any existing 2G systems. Hence its diffusion was not in the interests of most incumbent vendors. The government has manipulated different tactics as suggested by Markus et al. (2006) to solve these challenges (Table 3).

------------------------------------------------------------------------------------------------

Table 3 Solution to challenges in TD-SCDMA development and diffusion

-------------------------------------------------------------------------------------------------

GSE support was in place throughout the process of TD-SCDMA development and diffusion. TD-SCDMA standardization was in fact a national project. However, the government lacked technology expertise thus nominated CATT (later Datang Telecom) as the surrogate organizer representing its interests (Schmidt and Werle, 1998), which would finally hold key IPRs of this home-grown standard (Yu, 2011). Datang Telecom led rounds of "test - technology improvement - test" on TD-SCDMA system. The products of ZTE and Potevio formed the core part of the pilot test network. The leading role of these GSEs created the so-called "penguin phenomena" (Markus et al., 2006). Other Chinese and foreign firms followed and started to invest in TD-SCDMA products.

Scoping decisions on technologies and R&D partnership were critical, as it was impossible for GSEs alone to develop a complex technology system from scratch in a short time. In the beginning, the government would like to develop a 3G standard compatible to existing 2G networks. However, this attempt was not supported by foreign technology giants controlling the 2G technologies thus China had to opt to develop a path-breaking TD-SCDMA system, which was based on Cwill’s SCDMA scheme of intelligent antenna technology and Siemens’ TD method of signal transmission (Marukawa, 2010; Meng and Yao, 2000).

Governance was about organization setup. In the standard development stage, the formation of different kinds of organizations facilitated GSEs and private vendors efficiently working together on specific R&D tasks. Xinwei was a joint venture of CATT and Cwill focusing on intelligent antenna technology. TTACG was a committee selecting TD as the signal transmission solution. With CATT, Cwill and Siemens as the core members, the 3G R&D Team worked on the mutual adaptation of TD and SCDMA technologies, and drafted the standard proposal for ITU. In the diffusion stage, a relatively balanced approach was adopted in the hope of creating a level-playing-field for all stakeholders in adopting the China-born 3G standard (Tsai and Wang, 2011). TDIA, as an arena for firms to discuss key issues about TD-SCDMA diffusion, was open to different domestic and foreign vendors as well as their joint ventures. These firms focused on different aspect of the TD-SCDMA system. For example, LG succeeded in manufacturing mobile handsets; T3G was a joint venture of Datang Telecom, Samsung and Texas Instruments specializing in chip design; Datang, Potevio and ZTE formed joint ventures with Alcatel, Nokia and Ericsson, respectively, to invest in TD-SCDMA network (Colin, 2007; Liu, 2008; Wang, 2005).

IPR agreement let broad ranges of TD-SCDMA stakeholders receive technology fundamentals so that they could invest in this technology. It helped forge trust among different technology players, motivating them to devote their resources to TD-SCDMA diffusion (Blind, 2004). During later 2003 and early 2004, MII arranged Datang Telecom to transfer core IPRs of TD-SCDMA to other TDIA members (Marukawa, 2010). As a senior manager in ZTE commented, this transfer enabled them to quickly approach the frontier of TD-SCDMA diffusion; ZTE started to treat TD-SCDMA as its own standard, and engaged 3,000 R&D staffs and other resources in its commercialization.

Moral suasions by the government showed stakeholders of the Chinese 3G market that TD-SCDMA carried a strong national interest, and China would firmly support its successful development and deployment. One measure of suasion was financial support. Xinwei received 20 million RMB ($2.5 million) from MPT when formed by CATT and Cwill (Marukawa, 2010). In February 2004, MII launched TD-SCDMA R&D and Industrialization Program (TRIP), which had a budget of 708 million RMB to subsidize participating Chinese firms (Zhang, 2008). During 2005-2007, national banks were asked to offer loans with privileged interest rates for building pilot network and conducting tests. The sum of loan was 38 billion RMB and Datang Telecom alone received about 1.5 billion RMB (Liu, 2008; Tsai and Wang, 2011).

High level government officials voiced their supports to TD-SCDMA. As early as in January 1998, the Chief Scientist of MPT set the tune that China would develop and adopt its own 3G technology, as China couldn’t rely on foreign technologies forever in constructing its mobile telecommunications infrastructure. On 10th April 2007, during his visit to Korea, from SK Telecom headquarter Chinese Prime Minister had a few minutes of video conversation with the MII minister who resided in Beijing, with TD-SCDMA system being used on both sides. He declared China would support international cooperation in TD-SCDMA diffusion (Li, 2007).

Preferential policies were applied. In October 2002, MII assigned 155 MHz of asymmetrical radio frequencies to TD-SCDMA, even though it was still under laboratory testing. In contrast, it gave only 60 MHz of bandwidth to WCDMA and CDMA2000, respectively (Yan, 2007). Moreover, TD-SCDMA was granted as a national standard as early as in January 2006, but until May 2007 when WCDMA and CDMA2000 got such a recognition (Wang, 2005). Last, TD-SCDMA was selected as a showcase of China’s achievement in indigenous innovation. Specifically, during the Beijing Olympic Games held in August 2008, an important national event, TD-SCDMA services were offered in eight competition cities. By the end of this event, 175,000 customers registered to TD-SCDMA services with China Mobile (Colin, 2007; Lau, 2008).

By 2000 soon after ITU published the 3G standards, most of the other countries had already started deploying 3G networks. But in China, MII officially kicked off the 3G operation in as late as January 2009 (China Daily, 2009; Marukawa, 2010). The government let the 3G market wait TD-SCDMA to become matured and an industrial value chain for its diffusion to be established, which would ensure this China-born technology could compete against WCDMA and CDMA2000 when being deployed in China.

7 Discussions and Conclusions

7.1 Theoretical Reflections: Tactics in Managing Standardization

The TD-SCDMA case demonstrates that, in a country with a weak independent R&D and industrialization capability, government support is critical for a project of complex technology standardization to overcome various technological obstacles and market resistance. In particular, GSEs support was evident throughout the process of TD-SCDMA standardization and played a key role in the success of this government-sponsored initiative. In the standard development stage, CATT helped Cwill and Siemens to transform their proprietary technologies into the basic components of the TD-SCDMA standard. In the diffusion stage, GSEs were the initiating, core members of the industrial value chain. Datang Telecom led two other GSEs, Potevio and ZTE, to test the TD-SCDMA system. Potevio and ZTE also actively collaborated with foreign firms to produce equipment compliant to the TD-SCDMA standard. The leading incumbent operator, China Mobile, gave up its substantial interests in WCDMA and undertook the task of deploying the indigenous TD-SCDMA system. We can say that through their substantial inputs in TD-SCDMA, GSEs translated the interests of broad ranges of technology players including international technology giants, which gradually joined in the TD-SCDMA diffusion process. These GSEs were the leading "penguins" of the "penguin phenomena" in TD-SCDMA deployment (Markus et al., 2006).

In fact, GSE support in national standardization initiatives can also be found in other countries with strong technology innovation capability. For example, in history the UK government controlled the setting of key British TV standards through the state-owned broadcaster BBC (Tilson, 2008). Moreover, government-controlled standardization bodies can play the leading role in national standardization efforts. For example, in Korea the Telecommunications Technology Association led the development of Wireless Internet Platform for Interoperability (Lee and Oh, 2008), and in Japan the Association of Radio Industries organized 2G system standardization (Funk, 2001). Therefore

Proposition 1: the government support through GSEs to an initiative of complex technology system standardization would help to ensure its success.

We find that the scoping tactic plays a particularly important role for standard development. In the TD-SCDMA case, the key scoping decision of the Chinese was that CATT would work with a limited number of foreign technology developers (Cwill and Siemens), which had the required technological resources and also strong interests in the Chinese initiative of 3G standardization, to develop a standard incompatible to existing 2G systems. In making this scoping decision, the government considered the maneuverable R&D resources and the time restriction in setting the 3G standard, and followed the principle that a small size in research group grants an advantage of high working efficiency (Weiss and Cargill, 1992). The development of an ideal 3G standard with backward compatibility is a time-consuming process, requiring the joint efforts of several firms, as in the WCDMA and CDMA2000 cases (Fjermestad et al., 2006). However, China faced a tight time restriction to submit its 3G standard to ITU. Moreover, GSEs lacked the required R&D capability to independently develop the 3G standard, but most of the technology giants had no interests in collaboration with them in this endeavor, which was meant to create a GSE-controlled system that would compete with their technologies.

We observe the tactics used to address dilemmas in standard setting determine the properties of the standard being developed which in turn the success of standard diffusion (Markus et al., 2006). A country should consider its capability of organizing technology diffusion when making scoping decision on standard in the R&D stage. In the TD-SCDMA case, the scoping decision of developing a path-breaking 3G standard enabled China to work out a 3G standard in a short timeframe (Yan, 2007), but ignored the interests of a broad range of stakeholders in the 3G technology and market. Leveraging the market size advantage and relying on the strong state-controlled economic and technological sectors, the Chinese government could employ different tactics to promote the successful diffusion of TD-SCDMA standard, which required as many firms as possible to participate, creating the bandwagon effect (Suttmeier, 2005; Weiss and Cargill, 1992).

Of all of the tactics, moral suasion was a decisive one. which was in fact a mix of different measures, including financial measures, like IPR transfer compensation and the provision of sufficient amount of bank loans with privileged interest rates, the speeches by high level officials declaring the government support, preferential policy in allocating 3G frequency spectrums, publishing TD-SCDMA as a national standard earlier than other 3G standards, ordering the dominant China Mobile to deploy it, and exclusively offering TD-SCDMA services during Beijing Olympic Games, although licenses for 3G operation were not officially issued yet. Most importantly, 3G licenses were issued until when TD-SCDMA technology was believed to be matured and its industrial value chain was established. Other 3G systems could only wait, seeing their advantage over TD-SCDMA faded out and TD-SCDMA achieved steady growth in ability to compete with them. Therefore

Proposition 2: In the standard development stage, scoping decisions by the government concerning technology and R&D forces are critical, which should be based on the maneuverable R&D resource and its capability of organizing the standard diffusion.

Proposition 3: In the standard diffusion stage, moral suasion by the government is critical, which should ensure the formation of an industrial value chain of broad ranges of firms with required technology commercialization capability.

7.2 Generalization of Findings and Practical Implications

Our theoretical propositions are developed from a case of standardization of a complex technology system with a tight time restriction in a developing country context. Indeed they are applicable to other kinds of government-sponsored standardization initiatives. For example, we can draw upon these propositions to interpret the experiences of standardization of Wireless Internet Platform for Interoperability in Korea organized by the Ministry of Knowledge Economy (Lee and Oh, 2008), and 2G system development and diffusion in Japan with state-controlled NTT as the leading actor (Funk, 2001).

This case study has important practical implications. For countries like China, Japan and Korea with a national priority of supporting domestic firms to control technology and market, the government can play an important role in standardization (Funk, 2001; Lee and Oh, 2008). Especially in a developing country like China, with high technological and market uncertainties and weak R&D capability, the government should intervene in important standardization initiatives through its power and control over national resources. Particularly, it can take measures to motivate foreign technology giants to collaborate with domestic firms in exploring key technologies (Suttmeier, 2005).

For a national standardization project, an important challenge for by the government is the scoping decision on its surrogate to lead the standardization process (Schmidt and Werle, 1998). In the TD-SCDMA case, Tsai and Wang (2011) criticize the government for "picking the loser" as the leader. In fact, in developing and commercializing a large-scale 3G system, Datang Telecom is even weaker than other GSEs like ZTE. This "picking the loser" policy is blamed to be the main reason of the delay of the Chinese 3G market. China Mobile is suggested as a more appropriate candidate than CATT for this role, sitting in the core of the value chain of 3G mobile business (Harwit, 2007; Soh and Yu, 2010). China has learnt its lessons when organizing the standardization of 4G system. In December 2007, the State Council allocated about 20 billion RMB to set up the Next Generation Wireless Broadband Program to focus on the R&D of 4G standard called Time-Division Long-Term Evolution (TD-LTE). Different from the 3G case that followed a revolutionary innovation trajectory, TD-LTE is a natural evolution to TD-SCDMA controlled by GSEs. The government designated China Mobile, the TD-SCDMA operator, as its surrogate organizer (Yu, 2011).

7.3 Limitations and Future Research

This paper moves one step further in applying the collective action method of Markus et al. (2006) to standardization research. We find that this method is useful but also has limitations. First, while we observe that the suggested tactics can be employed by the government to support a standardization initiative, they are not exclusive. It is necessary to combine collective action theory with other literature to generate a new set of solutions and tactics of government interventions, for example the institutional framework by King et al. (1994) that suggests government can intervene in innovation efforts through a particular set of actions. Second, in the TD-SCDMA case, it is evident the timing for issuing 3G licenses is critical in ensuring that this indigenous standard successfully diffused in the market. Future research may look at not only what tactics are useful, but also when a specific tactic should be used. Moreover, our theoretical propositions are generated from a case of complex technology system under tight time restrictions in an emerging economy where the government controls national R&D resources and the market. We need to test them in other kinds of government-sponsored standardization projects and diverse technological, economic and institutional contexts.

7.4 Conclusion

Collective action perspective is useful for understanding the mechanisms of government interventions in standardization. In doing so, first, the heterogeneity of participated actors should be identified in terms of their interests, resources and capabilities. Second, the challenges for the standardization organizer in the development and diffusion stages due to actor heterogeneity should be analyzed. Last, different tactics taken by the government, including governance, scoping decision, GSE support, IPR agreement and moral suasion should be described.

Some important theoretical propositions on the methods of government intervention in standardization have been developed. In a government-sponsored standardization initiative, there are different but interrelated dilemmas in standard development and diffusion stages. The selection of whom to develop what kind of a technology obviously impacts the success of its diffusion. Different tactics play various roles in the two stages of standardization. The scoping decisions are critical for standard development, while moral suasion has a significant role in the diffusion phase. In general, government support through GSEs helps to ensure a standardization initiative is successful, especially that of complex technology systems in developing countries.