حقوق مالکیت معنوی، موافقت نامه های تکنولوژی استراتژیک و ساختار بازار: مورد GSM

This paper investigates the role of intellectual property rights (IPRs) in shaping the GSM (global system for mobile communications) industry. This industry is an example of a high-tech industry in which standards play a large role. In the process of designing the GSM standard, a lot of attention has been given to IPRs, mainly to avoid a situation in which a single IPR holder could hamper or even totally block the development of the standard. Nevertheless, the ultimate GSM standard contains a large amount of so-called ‘essential IPRs’, i.e. IPRs without which the implementation of GSM products is impossible. The GSM case provides an interesting example of how (essential) IPRs ownership and alliance networks influence each other, and how both of them affect market structure and market shares. The play with the essential GSM IPRs, and the strategy of Motorola in particular, is found to have dramatically changed the standardization processes in the telecommunications industry. Where IPR was considered a non-issue in this sector for many decades, it is now among the main issues to be resolved for any new standard, as has recently been shown with the standardization of third-generation mobile networks. Our findings with respect to alliances reveal that timing of the emergence of strong network positions is in line with the findings on essential IPRs. We found for three of the four dominant network players that their position in the network is based on ownership of essential IPRs. The relationship between market power (inclusion in the top-5 equipment suppliers) and the two variables of our main interest (essential IPRs and network centrality) is found to be a positive one with some notable exceptions.

The notion of the knowledge economy implies that knowledge has become a firm’s primary means of generating profits. The large body of literature on the subject (for an overview see, e.g. Boisot, 1998) seems to point to the important conclusion that the extent to which a firm can generate and exploit economically useful knowledge depends on factors that include (strategic) management decisions as well as external factors. How these factors influence the link between (un)successful knowledge accumulation and market exploitation differs greatly between technology fields or sectors, however. It is the aim of this paper to investigate, analyze and describe this link between knowledge generation in firms and external factors in the specific context of mobile telecommunications, more specifically the development of the GSM (global system for mobile communications) system.1 We chose the GSM industry because it provides an example of a successful technological and market standard. With the increasingly important role of standards in the telecommunications industry (we will discuss this in more detail below), the understanding of how a successful standard can be set also becomes increasingly important. The crucial aspect in the standard setting process with regard to knowledge lies in intellectual property rights (IPRs). Especially so-called essential IPRs (without which products adhering to the standard cannot be manufactured), play an important but complicated role. Obviously, there is some tension between the private character of IPRs, and the public interest that a standard wants to foster.2 As will be argued in the next section, this gives rise to a complicated process of negotiations, of which the GSM case was one of the first to take place in Europe within the information age. Drawing lessons on the relation between ownership of essential IPRs and other technology-related intangible assets thus seems to be of importance, both from a policy and scientific point of view. With multiple firms owning (essential) IPRs embodied in a standard, strategic technology alliances are of crucial importance. Holders of essential IPRs may cross-license to each other, or engage in (partly) other than licensing agreements. Firms without the access to essential IPRs may use strategic technology alliances in order to gain access to such knowledge, although they may be in a relatively bad position to do so. However, (essential) IPRs are obviously not the only factor having an impact on strategic alliances. Manufacturing capabilities, (tacit) knowledge not laid down in IPRs, or previously obtained market positions are all examples of other factors that may influence the degree to which a firm is able to attract partners. Although relatively neglected in the traditional literature, co-operative agreements have now become an important and recurrent issue in strategic management, international business, industrial economics as well as in organization studies. Scholars in the field of innovation studies (e.g. Nooteboom, 1999 and Hagedoorn and Schakenraad, 1993, Archibugi and Pianta, 1996) have observed a declining importance of large in-house R&D laboratories, and a simultaneous increase in interfirm co-operation. Although, the innovation literature has been rather neglecting the ex-post innovative performance effects of strategic alliances, an increasing number of publications has shown that strategic alliances do indeed contribute significantly to the innovative performance of companies (for an overview see e.g. Duysters and Hagedoorn, 2000). Innovation can therefore, no longer be seems as the sole outcome of internal accumulation of know-how. In today’s turbulent business environment innovation comes about by the interplay of two distinct but related factors: endogenous R&D efforts and (quasi) external acquisition of technology and know-how. It is often noted that a firm’s capability to absorb externally generated knowledge by means of strategic alliances is to a large degree dependent on the degree of knowledge in a specific field. Therefore, we might argue that if the core of a company’s technology base is not sufficiently developed or adapted to the new technology, then the absorption of newly acquired external technological knowledge within the technological core of a company is very difficult. The research question that we are therefore interested in with regard to the GSM industry can thus be formulated as follows. How do the ownership of essential IPRs, the position of a firm in the overall structure of the network of strategic technology alliances, and the market position of a firm interact? From the answer to this question, we are interested in drawing more general conclusions for the process of technological standardization and the relationship between technology assets and firm success in high-tech markets where standards are important. The main variables in our research question are interwoven in a complex pattern of causality. For example, at one level of analysis, we find that ownership of essential IPRs may strengthen a firm’s position in the alliances network, and this in turn leads to market power. But at the same time, market success will enhance the firm’s technological capability (learning effects as well as through availability of resources for R&D investment), and the same can be said about knowledge capital gained through networking. Hence there is a feedback from alliances and market success to knowledge capital and patents (ownership of IPRs). Our intention in this paper is not to disentangle all these causal links in a precise and final way, but rather to provide a narrative interpretation that is well founded in quantitative data and historical analysis of the GSM industry. By the mid-1990s, the largest GSM networks by far were deployed in Europe. To determine market structure for GSM infrastructure equipment, this study focuses on all European GSM networks that had 100,000 or more subscribers by the end of 1997. Market shares for the two main subsystems, called switching and base stations, are calculated independently and weighted against the size of each of the 33 included networks. Market shares for GSM mobile terminals are world-wide figures for 1996. The results for the 11 largest suppliers are shown in Table 1.3 Overall, there are five players (Ericsson, Nokia, Siemens, Motorola and Alcatel) that dominate the market. In each of the three segments that are distinguished in Table 1, these five players hold approximately 85% of the market or more. Also, each of the five firms generally has at least a market share of 10% in each of the three segments (with only three major exceptions: Motorola in switching, Siemens in base stations and mobile terminals, and Alcatel in terminals). Other firms in the Table typically hold much smaller shares. Given the formulation of our research question above, we will attempt to provide an answer to the question how these five firms have come to dominate the market, on the basis of two major (interacting factors): the ownership of essential IPRs (as a result both of technological competencies of firms, and strategic management decisions), and the position of the firm in the network of strategic alliances. Table 1. Supplier Market share switching (%) Market share base stations (%) Market share mobile terminals, world-wide (%) Rank on total GSM market Ericsson 48 37 25 1 Nokia 14 22 24 2 Siemens 21 2 9 3 Motorola 1 13 20 4 Alcatel 10 10 6 5 Lucent 2 4 6 Matra 2 3 7 Italtel 0 5 8 Nortel 1 0 3 9 Philips 0 2 10 Orbitel 0 2 11 Other 1 0 13 – Source: Bekkers and Liotard, 1999, pp. 123–124. Ranking is based on the average of all three subsystems market share, assuming that all subsystems are roughly equally important in the total sales GSM suppliers. Recent market shares are not very different from those in 1996, although for mobile terminals Nokia seems to have won a higher share at the cost of Ericsson. Table options The main thread of our story is an historical overview4 of the GSM industry, with the process of standard setting as the most important element of this process. This history will be discussed in two parts. First, Section 2 will discuss the role of IPRs in the telecommunication sector in general, and in the process of GSM standard setting in general. Given that GSM will be described as a case in this section, the broad history of the standard will be illustrated. Section 3 will focus on essential IPRs in GSM, by introducing some descriptive statistics from a database on essential IPRs. Given that the data on essential IPRs are firm-level data, we will illustrate the history of GSM from the point of view of individual companies in this section. Among other things, we will make a sub-division into periods: a pre-standard period that is characterized by uncertainty about future developments; a period of development of the basic standard immediately following the decision for the GSM standard; and a final period of enhancements to the standard combined with large scale diffusion of the basic technology in the market. As we will try to show, individual firm strategies with regard to R&D and the management of (essential) IPRs are a crucial factor in shaping both the overall market structure in the industry, and the structure of the alliances network. This is the second part of our story, told in Section 4. The final Section 5 will bring together the main pieces of the story and draw some general conclusions.

The GSM case provides an interesting example of how (essential) IPRs ownership and alliance networks influence each other, and how both of them affect market structure and market shares. We have shown how the GSM market has become dominated by five major firms in the late 1990s: Ericsson, Nokia, Siemens, Motorola and Alcatel. Together, these five firms control more than 85% of the European GSM market (which is the largest in the world). We have shown how two of these firms (Motorola and Nokia) are characterized by both a strong position with regard to the ownership of essential IPRs and a central position in the network of strategic technology agreements in mobile communications. Two other firms score relatively high on at least one of these two variables: Ericsson with regard to network centrality (but not essential IPRs) and Alcatel with regard to essential IPRs (but not network centrality). Siemens has neither a strong position in essential IPRs not in network centrality. The relationship between market power (inclusion in the top-5 equipment suppliers) and the two variables of our main interest (essential IPRs and network centrality) is thus at best a positive one with some major exceptions. One is thus tempted to conclude that a pure quantitative analysis of the relationship between these three variables leaves important parts of the story of how these five companies came to dominate the GSM market untold. The key to understanding these ‘missing links’ largely lie in the activities of one company, Motorola, during the period just after the technical GSM standard had been set. We identified three periods in the history of GSM. The first is a pre-standard period (until February 1987). In this period, there was huge technological uncertainty on which of the competing technologies would be adopted as the standard. Thus, what later became ‘essential’ IPRs (patents) to the GSM standard from this period, were at the time just one of a number of options for the future. A high number of (with hindsight, essential) patents during this period did not necessarily lead to later dominance in the industry, as is shown by the evolution of the market position of Motorola and Philips. Philips was the company with most essential patents from the pre-standard period. However, it did not play a major role in the production and sales of GSM equipment afterwards, mainly because of strategic choices of the management. Its strong early position in terms of technology and patents did, however, lead to early dominance of the technology alliances network. But this position waned when other players started to develop the GSM standard later on. Motorola, on the other hand, was able to use its relatively strong position in the pre-standard age in the period in a more vigorous way afterwards. During the period until 1991, which we characterize as the period in which the basic standard was developed, Motorola built up a strong portfolio of essential patents in GSM. Other firms, including those in Europe most involved with the development of GSM (e.g. Ericsson, Siemens, Alcatel), did not follow an aggressive patenting strategy, basically because they were used to manners of conduct in a pre-liberalization European market (Ericsson), or simply because they did not have the inventions yet (Alcatel, Nokia). By using the negotiation power that came with its patent portfolio, Motorola could dictate its licensing conditions to all firms. The company thus imposed a market structure by conducting exclusive cross-license agreements with a selected number of other parties on the market. These parties were selected because their IPRs were valuable to Motorola (not only essential patents, but also others), or because their product line complemented that of Motorola. Also Motorola took the position of firms in the alliance network into account when selecting its cross-licensing partners (Ericsson). As a result, the importance of Motorola in the network of strategic alliances increased drastically in the late 1980s. Firms that took part in the cross-licensing agreements (i.e. Ericsson, Nokia, Siemens, Motorola, and Alcatel) dominate the market for GSM infrastructure and terminals. They hold well above 85% of the total market, which is estimated to be worth more than 100 billion US$.24 Only 5 years after the first commercial products were introduced on the market, other companies, including those from the far east and from the American continent, gradually succeed in capturing some part of this huge market. In the field of technology and essential patenting, this process of catching-up took the form of a number of additions to the standard in the form of more enhanced equipment or services. We denote this as the third phase in the history of GSM. This is the period when some of the major European firms (most notably Alcatel, Nokia and Telia) took out large amounts of essential patents in GSM. This is also the period during which Nokia and Ericsson greatly improved their position in the alliances network. The play with the essential GSM IPRs, and the strategy of Motorola in particular, appears to have dramatically changed the standardization processes in the telecommunications industry. From 1992 on, many firms have intensified their patenting activities, hoping to obtain essential IPR for future standards or additions to existing standards. Where IPR was considered a non-issue in this sector for many decades, it is now among the main issues to be resolved for any new standard, as has recently been shown with the standardization of third-generation mobile networks.25 Thus, within the major telecommunications firms, managers seem to have learned their lesson on the strategic importance of IPRs. However, at the level of the public interest in standard setting, the increasingly sharp negotiations about essential IPRs are not necessarily a positive development.