Journal article
Are open standards good business?
Electronic markets, v 22(1)
Mar 2012
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
The debate about the relative merits of open vs. proprietary standards is long and ongoing. Proponents of open standards argue that they are good for society as they encourage adoption, have lower risk, and increase interoperability between technologies. On the other hand, proponents of proprietary standards maintain that monopolistic returns are justified given huge upfront and ongoing investments. While there are merits to both sides of this debate, we take a more objective approach in evaluating whether it makes sense to develop or invest in open standards. We collect investors’ reactions to Extensible Markup Language (XML) schema announcements and compare these with estimated returns for the same stock to determine whether the returns were above or below normal. We find that investors prefer proprietary XML schemas to open XML schemas by as much as 28,000%. We also find that this preference has been stable over time except in 2001 – the period of the dot com bubble burst - when investors temporarily preferred open standards. We attribute these results to two things. First, expected returns from monopoly control of proprietary standards, even though uncertain, are often worth more than those expected from open standards. Second, it seems that the markets are still unsure of the monetary benefits of open standards to the firm. Thus, companies that embrace open standards will have to better communicate to the investors the value proposition of open standards if they want to generate positive reactions on their open standardization efforts.
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Details
- Title
- Are open standards good business?
- Creators
- Nitin Aggarwal - Department of MIS, College of Business San Jose State University 129 S 10th Street BT 250 San Jose CA 95192-0244 USAQizhi Dai - Department of Management, LeBow College of Business Drexel University 3141 Chestnut Street Philadelphia PA 19104-2875 USAEric Walden - Department of ISQS, Rawls College of Business Texas Tech University 703 Flint Avenue Lubbock TX 79409-2101 USA
- Publication Details
- Electronic markets, v 22(1)
- Publisher
- Springer-Verlag; Berlin/Heidelberg
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Decision Sciences (and Management Information Systems)
- Web of Science ID
- WOS:000301784700007
- Scopus ID
- 2-s2.0-84858754124
- Other Identifier
- 991014877800904721
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- Collaboration types
- Domestic collaboration
- Web of Science research areas
- Business
- Management