Markets transformed by globalization
In a world transformed by globalization, it is increasingly important to ensure the interoperability between goods, services and infrastructures.
In addition to novel challenges in the supply side and the buy side, especially the information and communication technologies, markets have also changed. These markets have been particularly transformed by globalization, because a growing number of various actors participate as consumers, suppliers and intermediaries in the trade of goods and services. These conditions require interoperability of one’s own innovative products and services with those of customers and existing infrastructures for a successful introduction into the market. Their importance is increased further by the new “open innovation” paradigm, which requires cooperation throughout research and development phases to integrate other technology suppliers as well as customers.
Interoperability spurs innovation
Interoperability has implications for competition policy because interoperable systems imply low barriers to market entry for innovative suppliers, as well as for innovative products and services. Competitive pressure for established companies increases, pushing innovative reactions in return. If one or several companies succeeds in sealing off complex systems through limiting interoperability, monopoly or oligopoly-like structures can evolve, which are characterized by inhibited innovation. The challenges in establishing a framework for securing interoperability lie in the equality of all business models, neither favouring one model nor putting it at a disadvantage. After all, innovations are also driven by companies that finance their investments in innovation through the thereby created intellectual property rights.
Standards promote innovation
Finally, the various strategies and instruments for securing interoperability have to be assessed regarding their impact on innovation enhancement. Apart from companies publicizing their own interfaces and open source codes, standardization constitutes an important and efficient instrument in transparent processes. A balance has to be kept between the interests of companies actively participating in standardization processes by publicizing technical knowledge and corresponding intellectual property rights, and the organizations which use these standards. Monopolization of standards by individual companies using restrictive licensing practices and disincentives for innovative companies that introduce their knowledge in standardization processes are to be avoided.
Standardization should be promoted by innovative companies, while at the same time the interests of users have to be recognized and integrated. Because the government is an important user of information and communication technology and products established thereon, representatives of corresponding institutions should actively participate in standardization processes and – if possible – abstain from regulatory intervention.
Dr. Knut Blind is Professor, Faculty of Economics and Management Chair of Innovation Economics at Berlin University of Technology, and Fraunhofer Institute for Open Communication Systems FOKUS Public Innovation. He is also Chair of Standardization at the Rotterdam School of Management, Erasmus University.