Multinational Corporations Shape Global Value Chain Development
parameters to operate more efficiently and sustainably and to minimize the risk of product failure. These parameters are often turned into industry standards, a battlefield where many MNCs fiercely compete. Such competition has always been intense, especially in high-tech industries. The first-mover advantage that comes from setting rules and standards can give a company a powerful edge (box 2.5). Many lead firms make aggressive moves to extend their influence by pushing their standards globally, often working in close alliance with governments.
BOX 2.5 Microsoft and Intel: How the Wintel standard ruled the personal computer industry Establishing its technology as an industry standard is one critical way for a firm to achieve long-term competitiveness. The success of Microsoft and Intel, which still dominate today’s personal computer (PC) industry, can be attributed largely to their ownership of the industry’s standards (the so-called Wintel standard). Before the 1980s, the early microcomputer market was rife with chaos and incompatibility (CasadesusMasanell and Yoffie 2005). Over time, a small number of de facto industry standards emerged, including the S-100 bus, the CP/M (Control Program for Microcomputers) operating system, the Apple II computer, Microsoft BASIC in read-only memory, and the 5¼ inch floppy drive. No single firm controlled the industry, and fierce competition spurred innovation in both hardware and software. But gradually Microsoft and Intel processors gained ascendance. The two companies had been collaborating since before IBM introduced its first PC in 1981, a machine that used Microsoft’s DOS (disk operating system) and the Intel chip design known as x86. Their continuing alliance gave them market dominance and shaped the PC business by defining the standard by which software developers created applications. The power to decide the shape of the PC rested firmly with IBM in the early 1980s. The IBM PC with the DOS operating system and the x86 chipset soon became the best-selling PC in the world, and a major part of the market began to use the same exact hardware (or a clone of it) to take advantage of the hardware-specific features offered by IBM. However, this group’s power to set industry standards began to shift in the late 1980s. Some major PC manufacturers, known as the Gang of Nine, decided to develop a bus type that would be open to all manufacturers, run as fast as or faster than IBM’s, and yet retain backward compatibility. About the same time, Microsoft’s Windows operating environment started to gain popularity. IBM planned to replace DOS with the vastly superior OS/2 (originally an IBM-Microsoft joint venture), but instead Microsoft pushed the industry standards in the direction of its own product, Windows. The Wintel alliance became particularly lucrative after Microsoft’s easier-to-use Windows software helped make the PC a mainstay in homes and companies. For the many competing computer manufacturers, the only common factors providing joint technical leadership were the operating system from Microsoft and CPUs (central processing units) from Intel. Over the following years, both firms in the Wintel partnership attempted to extend their monopolies (Wingfield and Clark 2011). Intel made a successful major push into the motherboard and chipset markets—at one point it was the largest motherboard manufacturer in the world and almost the only chipset manufacturer. Microsoft had two competitors in its core market in 1990 but none by 1996.a It pursued a policy of insisting on per-processor royalties instead of per-install royalties. Continued on next page ›
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