Government Intervention in Standardization: The Case of WAPI

Government Intervention in Standardization: The Case of WAPI

Brian DeLacey, Harvard Business School, Kerry Herman, Harvard Business School, David Kiron, Harvard University, Josh Lerner, Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research, and Wai-Shun Lo, Harvard Business School

5/23/2008
(Original Publish Date: 9/1/2006)

Government bodies have been playing an active and frequently controversial role in many standards competitions in recent decades. The growing literature on standards by economists has largely neglected this role. This paper seeks to take an initial step in addressing this gap in the literature, by examining the experience of one current, and quite contentious, public effort to promote a standard: the Chinese efforts to promote a wireless networking standard and the ensuing interactions with the efforts to create a standard in Europe and the United States. We highlight several observations from this case, which are particularly striking when we contrast this with the experience of the 802.11 technology - which also facilitates wireless computer networking - developed in the West. First, the role of the public sector was quite different. The development of the 802.11 standards in the Institute of Electrical and Electronics Engineers was driven by major technology firms, both within the standardization body and through the non-profit Wi-Fi Alliance, which played a more aggressive promotional role. Much of the success of the firms in promoting technologies that they had sponsored seemed to be driven by their size and market power. The WAPI process, on the other hand, was almost completely driven by the public sector. There was no significant investment by any major technology firm. Unlike the WAPI process - where the initial technology did not mature in the market, but was almost immediately sponsored by the national standardization body - the 802.11 standard was developed over time. Various companies brought forward technologies that they had developed, and in many cases refined in the marketplace and sought to obtain super-majority approvals from the IEEE. The standardization process was transparent and open for all who wished to participate. By way of contrast, substantial ambiguities surrounded the WAPI program. For instance, the objectives of the national standardization body sponsoring the project was a mystery. Some speculated that there were two factions (with more and less pro-market views) that were fighting over how and whether WAPI should be made into an international standard.