Impact of Standardization on Management Strategy: A new perspective on administrative strategy theory

Senior Fellow, RIETI

1. Introduction

In 2021, the Digital Agency was established to begin efforts to realize Japan's new national and social system. The digitization of society will continue to progress beyond 2022. As digitization is the process of transforming information into zeros and ones, it is in essence nothing other than the standardization of information (Note 1) [1]. This article examines how standardization, a technological concept of growing importance, can be handled in an analytical framework pertaining to business strategy. I discuss the limitations of analyzing technological standards using conventional administrative strategies. Moreover, by expanding existing management strategy theory (i.e., VRIO framework), I attempt to analyze the effects of standardization, especially in terms of its impact on competitive strategy.

2. Perspectives and Limitations of Conventional Administrative Strategy Theory

Currently, standardization has a growing impact on the competitiveness of products and services, but the implications of standardization for strategy have been analyzed only as a side issue in major existing management strategy theories (Note 2) [2, 3].

By its very nature, traditional management strategy theory has some aspects that are not suitable for delineating standardization strategies. One reason is that standardization was not as important a technical concept when the basic concept of the traditional analytical framework was presented (in the early 2000s) as it is currently. Another reason is that existing management strategy theory emphasizes how to achieve differentiation that is meaningful from a managerial perspective; standardization, which is the commonization of technology or non-differentiation, does not fit into the basic idea.

3. Impact of Standardization

(1) Analytical framework
The VRIO framework is a conventional leading analytical framework for business strategy [2]. VRIO is an acronym for Value, Rarity, Imitation, and Organization. Namely, a company’s competitiveness is determined by four factors: value (economic value), rarity (resource scarcity), cost of imitation, and organizational exploitation (organizational capability) (Note 3). In firm-level strategy, this framework emphasizes, among other things, having firm resources that are difficult for competitors to imitate. In other words, it focuses mainly on a company's distinctive internal resources that bring about sustainable competitive advantage.

The VRIO framework stresses the importance of producing products that are difficult to imitate and that can respond to market demands. In particular, this framework emphasizes the importance of organizational discipline for finding the technology that leads to such products to ensure the sustainability of a competitive advantage as a factor related to the organization. In the case of product manufacturing, if a company can seize market opportunities and create products (i.e., manufacture products that consumers want to buy), if it has a monopoly on the resources needed to manufacture those products, if it has the organizational capabilities to handle that technology successfully, and if the technology used to manufacture those products is difficult to imitate, the firm can secure a sustainable competitive advantage.

Even if a research department produces valuable and difficult-to-imitate technology seeds, it will be difficult to secure a sustainable competitive advantage if the organization cannot find new economic value in these seeds. For example, Xerox's Palo Alto Research Center (PARC) developed the graphical user interface (GUI) that is widely used in computer operating systems currently; however, it was Apple Computer's Macintosh that initially implemented this technology in products in the market (Note 4) [2, 4].

(2) Effects and impact of standardization
I discuss what effect standardization has on each analysis item within the VRIO analysis and what impact standardization has on business strategy (Table 1). I delineate this issue by referring to telecommunications equipment that provide communication functions as an example; all factors are assumed to be fixed, except for technological factors.

Table 1. Effects and Impacts of Standardization
Table 1. Effects and Impacts of Standardization
[Click to enlarge]
This conceptual framework refers to Barney (2007, p.150‐151) [2] and is modified based on the purpose of this study.

First, in terms of economics, the standardization of technology increases the economic value of products owing to external economies that result from network effects among the terminals. As for scarcity, the impact is considered neutral if scarcity is not due to technological factors. As for the difficulty of imitation, standardization may reduce the difficulty of imitation. Organizational factors have a positive or neutral impact on the continuation of competitive advantage if internal coordination of standardization activities is in place [5]. However, the higher the commitment to standardization, the greater the magnitude of the impact, given that standardization varies in intensity from using existing standards to developing original standards. In other words, this framework suggests that standardization increases economic value while decreasing the difficulty of imitation. If standardization increases economic value more than it decreases the difficulty of imitation, one can expect to secure a sustainable competitive advantage. Conversely, if the increase in economic value is less than the decrease in difficulty of imitation, one can expect only a temporary competitive advantage.

My analysis based on this VRIO framework suggests the importance of technical information management in standardization in terms of management strategy theory, and the importance of improving organizational exploitation and capability. Given that a certain amount of technical information must be disclosed in the formulation of technical standards in advanced technological fields, it is essential for companies to manage their technical information during standardization activities and to develop a management system for disclosing information in standards development organizations (SDOs) in order to make imitation difficult [5—10]. While the development of systems for information management within companies related to standardization is considered to be progressing to some extent, some differences exist in the treatment of disclosing information by companies in SDOs [10].

4. Conclusion

The significance and inherent limitations of analyzing the effects of standardization with the conventional theoretical frameworks regarding administrative strategy, especially in terms of competitive strategy, are delineated. The analysis, which is based on an extension of the existing framework, suggests that standardization increases economic value while decreasing the difficulty of imitation. The findings suggest that to secure a sustainable competitive advantage, improving organizational exploitation and capability regarding technical information management, among other actions, is essential for increasing the difficulty of imitation; encouraging this treatment is an important administrative and policy issue.


My studies in this article were supported by JSPS Grants-in-Aid for Scientific Research (15K03718 and 19K01827: Principal Investigator: TAMURA, Suguru). Because this remark is important academic information, the JSPS granting policy is appended as follows. “The views and responsibilities regarding research results resulting from a grant shall exclusively belong to researcher; the implementation and publication of said research results is not based on requests from the Japanese government body that provides the grant or others. Namely, the research funded by Grants-in-Aid for Scientific Research shall be conducted under the individual researcher’s authority with the researcher’s awareness and responsibility.” (Handbook on Grants-in-Aid for Scientific Research Program [Japan Society for the Promotion of Science] [in Japanese]) (Note 5).

December 22, 2021
  1. ^ Standards can be broadly classified into de jure and de facto standards. The standardization discussed in this article focuses on de jure standards (consortium standards), in which technical specifications are standardized through agreements among the concerned parties in a standard development organization (SDO).
  2. ^ Conventional business strategy focuses on analyzing the competitive environment and is suitable for analyzing de facto standards formed as a result of market competition when a monopoly market is achieved. A de facto standard is formed if a particular technical specification gains a significant market share.
  3. ^ This expanded framework, the Expanded VRIO framework formulated in this study, succeeds in assessing the impact of standardization on the sustainability of competitiveness, which has been difficult to explain using the previous frameworks, by taking technological factors as those related to the difficulty of imitation rather than those related to the rarity of resources and including the organizational capability to control technology information. I discussed technological factors here by expanding the original conceptual framework to analyze standardization. The initial analytical framework focuses on institutions' exploitation ability and emphasizes factors other than technological superiority. Namely, the idea is that, compared with simply acquiring technical information, gaining organizational capabilities that effectively utilize the collected technical information is difficult.
  4. ^ When Steve Jobs visited PARC, PARC demonstrated a GUI developed at PARC, which is said to have given him the idea about the implementation of GUI in Macintosh [4].
  5. ^ I have tentatively translated the original Japanese text into English to provide an approximate meaning.
  6. The content of this article is a part of my previous lectures at the Faculty of Science and Technology, Keio University (2018-2021) and the Graduate School of Information Science and Technology, The University of Tokyo (2018). This content is being documented and published for the first time. I would like to take this opportunity to thank the participants of the lectures.
  7. The citation style of the contents of this article: Tamura, S. (2022). Impact of standardization on management strategy: A new perspective on administrative strategy theory. RIETI Column, Tokyo: RIETI.
  8. The content of this article corresponds to the policy content of Chapter 2. 1. (6) "Promotion of research and development and social implementation to solve various social problems and utilization of the convergence of knowledge" of the Sixth Science, Technology and Innovation Basic Plan (FY2021-2025) [11].
  9. RIETI is a research and development institution designated by Article 2 of the Act on Improving the Capacity, and the Efficient Promotion of Research and Development through Promotion of Research and Development System Reform (Act No. 63 of 2008) and related to the Basic Act on Science, Technology and Innovation (Act No. 130 of 1995).
  10. Contact information:
    *Asterisked documents are suggestions for further reading.
  • [1] Tamura, S. (2013). Generic definition of standardization and the correlation between innovation and standardization in corporate intellectual property activities. Science and Public Policy, 40 (2): 143-156.
  • *[2] Barney, J. B. (2007). Gaining and Sustaining Competitive Advantage (third edition). NJ: Pearson Education.
  • *[3] Porter, M. E. (1980). Competitive Strategy. NY: The Free Press.
  • [4] Cringely, R. X. (1996). Accidental Empires. NY: HarperBusiness.
  • [5] Tamura, S. (2012). Effects of integrating patents and standards on intellectual property management and corporate innovativeness in Japanese electric machine corporations. International Journal of Technology Management, 59(3/4): 180-202.
  • [6] Tamura, S. (2015). Who participates in de jure standard setting in Japan? The analysis of participation costs and benefits. Innovation: Organization & Management, 17(3): 400-415.
  • [7] Tamura, S. (2019). Results of a survey on standardization activities: Japanese institutions’ standardization activities in 2017 (implementation, knowledge source, organizational structure, and interest in artificial intelligence). RIETI PDP 19-P-013, Tokyo: RIETI.
  • [8] Tamura, S. (2020). Results of survey on standardization activities for 2018 (state of implementation, advanced technologies, and organizational design). RIETI PDP 20-P-023, Tokyo: RIETI.
  • *[9] Tamura, S. (2021a). Results of the survey on standardization activity (2019): Situation of standardization activities in business entities and other institutions. RIETI PDP 21-P-015, Tokyo: RIETI.
  • [10] Tamura, S. (2022). Governance issues related to R&D information disclosure in standards development bodies: An overview of the results of the Survey on Standardization Activities (2019). RIETI Column.
  • [11] Cabinet Office. (2021). The Sixth Science, Technology and Innovation Basic Plan. Tokyo: Cabinet Office (in Japanese).

May 12, 2022