China's Demand-side-oriented Standard Strategy

Since 1990s, the competition of standard in international high-tech field and the ever-increasing technological trade barrier based on standard in international trade indicated that technological standard strategy has become the core strategy in the market competition between developed countries and mutli-national corporations. As a country which has a great demand of a variety of industrial and high-tech products, China is a potential dominant power in standards. However, due to the late development, lack of standard strategy and immature standard system, China appears to be passive in international standard competition. In order to change this situation, China should take advantage of demand side market power, and try to implement demand side oriented standard strategy.This paper combined both theoretical and imperial studies together, and adopted both qualities and quantitive analysis, consists of eight chapters:Chapter 1 introduced the content of this research. Chapter 2 and Chapter 3 conducted a literature review and theoretical studies, includes:expanding demand theory, market power theory, and demand management strategy, analyzing the implication of demand-side market power and functional mechanisms, constructing the theoretical and analytical framework of demand-side-oriented standard strategy. Chapter 4 conducted a comparative analysis of China and developed countries in terms of standard strategy, and advocated China's demand-side-oriented standard strategy and analyzed its feasibility. Chapter 5 and Chapter 6made an empirical study of China's demand-side market power and evolution of standards, mainly covers the following three aspects: First of all, to establish indicator system of demand-side market power by choosing import turnover of products, per capita national income and national population to represent three kinds of demand side market power, namely extensional, intensified and potential demand-side market power, so as to evaluate the absolute and relative demand side market power. Secondly, to conduct empirical studies of the relationship of China's demand side market power and evolution of standard and establish VAR model consisting variables such as China's absolute demand-side market power, overall economic scale and number of standards in order to evaluate China's absolute demand-side market power and evolution of standards. Thirdly, to apply Knetter(1989)'s model to establish micro-econometric model of demand side market power, conduct a case study of TD-SCDMA standard strategy. Chapter 7 proposed the detailed methods to implement China's demand-side-oriented standard strategy. Chapter 8 summarized research conclusion and outlook for future research.Main conclusions of this paper include:(1) In the competition for standards, there are both supply-side market power and demand-side market power, the latter is endogenous variable for standard. (2) The demand extensional effect and demand intensified effect would give rise to extensional, intensified and potential market power. However, demand-side market power is usually dispersed, implicit and potential; it would appear to be a potential market power to some extent. The demand side market power depends on the alliance and integration level of demand side. (3) The functional mechanism of demand-side market power mainly includes demand side net economy effect, preference consumption effect, demand discount effect, value chain elevation effect and direct economic effect etc. The competition for standard is the competition for dominant user's population and potential demander in the market. (4) China's absolute demand-side market power is rather poor. However, compared to either developed or developing countries, China's relative demand-side market power enjoys certain advantage and keeps increasing. Though national standard is the key source of fluctuation of China's absolute demand-side market power, it does not have apparent impact on the latter. National standard is the most apparent factor to influence China's relative demand-side market power, though the impact is not great. (5) Unlike developed countries that mainly depend on supply-side market power, the core of China's standard strategy depends on demand-side market power. China should effectively transform demand-side market power into standard power to implement demand-side-oriented standard strategy. The feasibility of this proposal lies in China's extensional, potential and "quasi-intensified" demand-side market power and their potential ability to ally and integrate. (6) China's TD-SCDMA standard enjoys certain extensional, potential and quasi-intensified demand side market power in 3G standard competition; thus, it increases China's bargaining power when exporting mobile phones from USA in international competition. (7)The method to achieve China's demand-side-oriented standard strategy have macro, middle and micro levels. It means to improve standard systems, concentrate demand side resources, introduce demand-side management, establish standard technology associations, let guilds to play a role, depend on industry cluster of specialty, strengthen allied R&D of common standards and actively participate international competition for standards.The innovation of this paper mainly includes:(1) Proposed and clarified the concept of demand-side market power, analyzed the types, characteristics, and functional mechanism of demand side market power, and conducted research of fundamental theory of demand side market power and standard competition. (2) In order to make up for the lack of demand side in existing theoretical analysis of standard competition, this paper adopted a new perspective of demand-side market power to discuss China's demand side oriented standard strategic choice.(3) Established indicator system for demand-side market power to evaluate China's absolute and relative demand-side market power and conducted empirical analysis of demand-side market power and the evolution of China's standard.