The importance of standards in communication networks cannot be emphasized enough in modern organizations, be it in bidirectional relations among mobile phone networks or in supply chains among enterprises. While technological communication standards are the backbone of machine-to-machine communications, application standards or more general, common agreements are strongly influenced by the social behavior and kind of trust among network participants. The speed of adoption, as well as the nature of the chosen standard depends on the economic efficiencies an adopter can achieve and benefit from. In the case of communication standards, it is mainly network effect benefits related utilities that can be achieved and they are therefore intensely discussed in this contribution. In addition, the internal benefits and impacts of communication standards are important for their adoption, as the empirical results of the application models have shown. Communication standards change the way business is conducted and therefore provide strong evidence of the importance of standards. In the light of network effect theory, the true nature of a communication standard and its characteristics in the form of being partly a public good reveal the nontrivial economic challenge of estimating the value of standards. Consequently, open standards are less diffused and implemented among potential network participants. The application models provided, the WebConverter solution and reputation-based process automation are just two alternative ways of lowering the entrance barrier for potential adopters who do not yet use such standards, or to increase the potential benefits accompanying communication standard.


Network Effect Communication Standard Adoption Decision Potential Adopter Network Market 
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© Deutscher Universitäts-Verlag | GWV Fachverlage GmbH, Wiesbaden 2006

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