Zhejiang University of Finance and Economics School of Finance and Public Administration Hangzhou, P R China

Beijing University of Posts and telecommunications School of Economy and Management Beijing, P R China *email address protected*


Technology standard and technical innovation are the core factors affecting advances of mobile communication competition individually and collectively. By reviewing the past forty years of evolution of technology standard and technical innovation, this paper explores the co-evolution mechanisms between technology standard and technical innovation. Based on the analysis, this paper firstly proposes that technology standardization tends to concentrate, while the modes of technical innovation switch from standalone closed innovation to systemic synergetic innovation. Secondly, the paper explores the co-evolution mechanism and effects between technology standardization and technical innovation. Thirdly, the paper argues that it is the synergetic innovation that plays the very important role that balances the value creation of technical innovation and value sharing of technology standardization. The conclusions of this paper have important practical implications for nurturing the synergetic mechanism of technical innovation ecosystem of mobile communication industry.


China has witnessed a very rapid growth of its mobile communication industry over the last two decades, since the first mobile operator China Unicon was founded in 1994 (Xia, 2012). Two meaningful institutional changes in the telecommunication sector which included the twice restructuring of the telecom operators around 2000 and 2008, were all mainly for the benefit of mobile communication and made some far-reaching influences on the development of the mobile communication (Xia, 2011). By the end of June 2014, mobile phone subscribers reached 1.26 billion; meanwhile, penetration rate reached 92.6 phones for every 100 people (MIIT, 2014). With the continuing expansion of mobile communication networks, the majority of the mobile communication standards from 1G systems to 4G systems, have been operating within China whatever the success or failure of the results. As a consequence, several actors and organizations have made great progress, contributing to the construction of an ecological system of mobile communication. For instance, three network operators have nurtured their powerful operation capabilities; network equipment manufacturers such as Huawei and ZTD, have been enormously successful, while other MNC’s have faced devastating failures. Content/application providers such as Baidu and Tencent etc have achieved great successes too; and service providers such as China Unionpay and Alibaba, handset manufacturers like Huawei, Millet, Lenovo and ZTE, have all benefitted from growth.

While the ecological system of mobile communication has become more and more diversified; questions have to be asked about the unsatisfactory performance of the homegrown TD-SCDMA standards in such a good market environment, for example China Mobile invested a lot but failed to withdraw their investment. Why could China fail to enjoy the fruits from the success of the homegrown TD-SCDMA? This raises the issue – is the innovation more important than standardization, and what is the co-evolution mechanism between technology standardization and technical innovation?

In order to explore these questions, this paper firstly generalizes the past forty years of evolution of the successive generations of standards in the mobile communication industry; secondly, the paper reviews the corresponding evolutionary process of the technical innovations mechanism and the ensuing results which accompanied the standardization processes of mobile systems; and thirdly, the paper explores the co-evolution mechanism between technology standard and technical innovation.

The contributions of this paper are as follows:

  •   It provides a historical review on successive processes of standardization in mobile communication from the earliest beginnings, and identifies, in a global perspective that the model of standardization shifted from performance-based de facto standards to design-based de jure technology standards between the 2G and 3G mobile communication system accompanied by the emergence of 3GPP and 3GPP2.
  •   Based on comparison of the functions of technical innovation and technology standardization, this paper elicits that the major force for technical innovation was oriented towards value creation, and the main dynamics of technology standardization was focused on integration for value sharing.
  •   According to the analysis of mutual effects and the co- evolution mechanism between technology standardization and technical innovation, this paper finds that the synergetic innovation mechanism plays a decisive role in promoting the performance of technology standardization and technical innovation in mobile communications industry rather than standardization.


2.1 Innovation impact on standardization

In most cases, technology innovation functions as market dynamics to determine a de facto standard. According to the U-A dynamic model, alternative technologies compete intensely until the dominant version gains sufficient market share to become the single standard (Utterback, 1994; Tassey, 2000). Market control by one firm can truncate this competitive process. Such control is particularly effective in cases of increasing returns and can quickly force acceptance of the monopolist’s proprietary technology element as the standard (Tassey, 2000). So for a de jure standard, the literature normally recognizes that standardization is a down- stream phase of innovation rather than a basis of technology innovation. So, technology standards only serve as the references for technology innovation (Jiang et al, 2012).

2.2 Standardization impact on innovation

Standardization affects the R&D, production, and market penetration stages of economic activity, and therefore has a significant collective effect on innovation, productivity, and market structure (Tassey, 2000). However, these effects can be both positive and negative.

Standards play an important positive role in promoting and driving innovation. The use of standards triggers innovation because technology providers can reduce their costs to serve customers by applying or providing innovative technologies. Standards can codify information of a particular technology, disseminate new knowledge, facilitate interoperability between new products and services, and provide a platform for further innovation (Jiang et al, 2012; Friedrich J, 2011). In addition, standardization plays an important role in synchronizing disjointed technical innovations in a systemic innovation; this then leads to the design and proto-type manufacture of viable products that attract the attention of business people for serious consideration of their introduction into the market (Kano, 2000).

However, standardization can increase efficiency within a technology life cycle, but it also can prolong existing life cycles to an excessive degree by inhibiting investment in the technological innovation that creates the next cycle (Tassey, 2000). So, a two- tiered approach in mobile communications, which defined successive generations of standards and only specified the interface specifications between sub-systems, was introduced in order to alleviate negative effects of standardization on technical innovations (Kano, 2000).


3.1 Research architecture

Since the days of Schumpeter (1950), technology and technical innovations have played an important role in the study of economics, industrial organizations, and development (Dosi, Teece and Chytry, 1998; Chandler et al, 1998; Kano, 2000). However, the literature is still seriously lacking in further research focusing on innovation in mobile communication. Standards are regarded as a tool for regulation and technical interconnection in the telecommunication industry (Kano, 2000, Jiang et al, 2012), but the papers are seriously short of exploring the relationship between innovation and standardization in mobile communications (Jiang et al, 2012).

Hence, this paper reviews the evolution of the successive generations of standards in the mobile communication industry in section 4, and further reviewed the corresponding evolutionary process of the technical innovations in section 5. A systemic thinking was applied to combine the viewpoints of both innovation and standardization, in order to explore the co-evolutions mechanism between technology standard and technical innovation in section 6.

A case study method (Eisenhardt, 1989; Yin, 1989; Gao and Liu, 2012) was used to study this complex process, focusing on identifying the key factors and underlying mechanisms. Specifically, the study tried to answer the following questions: what are the key functions that technical innovation and technology standardization played during the evolution of mobile communication? What factor impact on the co-evolution process?

3.2 Researchmethod

Data were collected for case analysis mainly by means of searching in literature and interviewing people who are familiar with the development of mobile communications. There are two aspects to be considered: (a) one of the authors started his career in 1986 as a telecommunication senior engineer engaged on technical projects on various telecommunication systems. For example, Ericsson’s AXE-10 Programmed Exchange System in China Telecom for thirteen years, GSM mobile network in China Unicom for three years, IP broadband backbones network in China Netcom for four years. Hence, the advantage of author’s career was of benefit in interviewing relevant experts of communication technologies and officials in government agencies, and (b) two authors have studied together on collaborative innovation during the doctoral period since 2006, and have fostered a good capacity to capture the key points at interviews.

Interviews took place between 2010 and 2014. People interviewed were from many organizations and government agencies, including multinational firms such as Siemens, Ericsson, Alcatel-Lucent, Qualcomm, LG, and Samsung; key domestic equipment firms such as Datang, ZTE, Huawei, and Potevio; mobile carriers such as China Mobile, China Telecom, and China Unicom; content/application providers such as Baidu and Tencent; service providers such as China Unionpay and Alibaba; Handset makers such as Huawei, ZTE, and Lenovo, Millet; IC suppliers such as T3G, Spread Spectrum Communications, CCSA, CYIT; TD-SCDMA Industry Alliance, TD- SCDMA Technology Forum; and government agencies such as MIIT, the Ministry of Science and Technology (MOST), and the National Development and Reform Commission(NDRC).

Following the grounded theory development principles, data analysis was conducted simultaneously with data collection (Glaser and Strauss, 1967; Strauss and Corbin, 2008). According, Gao and Liu (2012), commentaries were written on each interview and whenever a new theoretical concept emerged. To assure validity, the theoretical sampling principle and data saturation principle were followed. Patterns were also searched for by comparing across events to look for different interpretations of those events by the key players.


4.1 Evolution of standardization

Since the first mobile phone set of the 1G System was put into service in 1973(Chen, 2013), systemic innovations in mobile communications have been recognized as successive generations, each of which required a new standard (Antonelli, 1998). From the viewpoint of standardization, a systemic innovation requires an overall framework and a set of interface specifications among component subsystems. But the emergence of mobile phone equipment has been regarded as a component or sub-system of the total fixed telephone system rather than as stand-alone system in the mid-1970s.

The first generation (1G) mobile system which supplied public cellular mobile communication services as a system rather than sub- system, were standardized around the 1980s. Since there was no predecessor to follow, the type of innovation of the 1G system obviously was a systemic innovation that set up of a new standard architecture.

The 1G system was mainly launched by monopoly operators of fixed telecommunication networks, or through close cooperation between operators and manufactures. For example, the NTT Mobile System which was developed originally by the biggest Japanese telecommunication corporation, NTT, and first operated in 1979; Nordic Mobile Telephony (NMT) was launched in 1981, and Total Access Communication System (TACS) was launched in 1985 in Europe; Advanced Mobile Phone System (AMPS) was developed independently by AT&T and put into use around the USA in 1983. Besides that, the 1G was all regional standards, because the mobile phones at that time were too big to carry across the Atlantic or the Pacific Oceans.

The second-generation (2G) digital system was standardized in early 1990s, including two main streams (Kano,1999): firstly, the personal communication system (PCS), such as the Digital Enhanced Cordless Telecommunications (DECT) of Europe was standardized in 1993, the Personal Handy phone System (PHS) of Japan also in 1993, and as many as seven standards in USA in 1990s. Secondly, the cellular mobile systems, such as the Global System for Mobile Communication (GSM) of Europe was developed in 1992, the Personal Digital Cellular (PDC) of Japan in 1993, and the ANSI- 136 (based on TDMA technology) and ANSI-95 (based on CDMA technology, dubbed as CDMA one) of USA, standardized in 1993 and 1995 respectively. In this paper the authors pay more attention to the cellular mobile system rather than the personal communication system (PCS) in order to focus on the research target.

The 2G standard was also a regional standard based on a global viewpoint, because this was not approved officially by the ITU (International Telecommunications Union). However, from the regional viewpoint of Europe, the GSM standard was regional de jure standard within Europe, which was officially approved by ETSI. Due to the double opportunities in the monopolized market in Europe and competitive market outside Europe on one side, and increasing the efficiency of economic activities by improving products’ compatibility and interoperability on the other side, the GSM standard gained more competitive advantage in the market than other competitors, and began to be established as a prototype of world class standards.

The third-generation (3G) multimedia system included two main streams: International Mobile Telecommunication-2000 (IMT- 2000) and wiMAX. In this paper the authors ignore the wiMAX in order to focus on the research target. Three main technical standards were covered by IMT-2000 and were officially standardized in year 2000. The GSM evolved 3G system standard (dubbed as WCDMA), was developed by an industry forum called the 3GPP (3rd Generation Partnership Project); and ANSI-95 evolved 3G standards (dubbed as CDMA2000) by the 3GPP2. While Japan decided not to evolve its 2G system which was called PDC. The Chinese became a new member of the 3G family with the homegrown TD-SCDMA standard instead.

The 3G standard was a global standard, which was officially approved by the ITU and licensed by governments around the world as regulation policies. The procedures and modes of standardization changed greatly from 3G, which left the cut-throat competition behind the standard and paid more attention to the technical design-based proposals.

The fourth generation (3G) LTE system was dominated by the 3GPP (3rd Generation Partnership Project). LTE Release 8 was frozen in December 2008, and this had been the basis for the first wave of LTE equipment. The 3GPP officially began research work from R8 in 2004, and has released five versions of standards about LTE up till now, such as R8, R9, R10, R11, and R12. The standard version of R10 was completed in March 2011 and is called LTE- Advanced system (Sun et al, 2013). The two versions of the LTE family, such as FDD-LTE (WCDMA evolved 4G system standard), and TD-LTE (TD-SCDMA evolved 4G system), are very similar.

In fact, they differ only in the physical layer and, as a result, the version implemented is transparent to the higher layers. This means that UEs are able to support both TD-LTE and FDD-LTE with one chipset with only minor modifications required. All major chipset vendors, such as ST-Ericsson, Altair, Semiconductor, and Qualcomm, have already released chipsets that support both LTE flavors. UEs based on those chipsets are available from Sony Ericsson, Huawei, Samsung, Nokia, and others (Ascom, 2012). The architecture of distributing the intelligence amongst the base- stations in LTE provides a chance for the same base station to be shared by different operators.

By generalizing the successive generations of standardization in mobile communication, three trends can be highlighted:

 The number of standards from 1G to 4G was gradually deceased while reaching the peak number of more than ten standards for 2G systems, three versions in the IMT-2000 family, and two versions to only one LTE family. The trend is clear that the form of standards is integrated, based on the viewpoint of quantity of standards.

 The differences between the standards became smaller. For 3G standards of the IMT-2000 family, there was little difference among the three standard versions due to backward compatibility with different 2G systems; and for 4G standards of LTE family, there were only small differences in the physical layer of user terminals. It is obvious that the content of standards is getting integrated based on the viewpoint of differences between the standards.

 The model of standardization has shifted between 2G and 3G systems. According to the preceding classification of the standards as four types, the standards for 1/2G systems are regional performance-based de facto standards, which mainly determined by market dynamic, the standards for 3/4G systems are global design-based de jure standards, which mainly determined by a consensus of various combinations of vertical and horizontal consortia and accepted by governments finally. Understanding the transition of standardization models can clarify the pattern of market competition after the deployment of the 4G standard to reshape new market advantages.

4.2 Evolution of innovation mechanism

Since the first mobile phone set of the 1G System was put into service in 1973, the global market place and the information and telecommunication technologies have gone through tremendous changes. The traditional approach of self-reliance or self- sufficiency for global competition became a virtually impossible goal. Even the global leaders in their respective industries found it necessary to find collaborative partners to design an innovative value chain, combining their own core competencies with those of other world-class firms (Tapsott, 2006). Hence, the models of innovation mechanism in the mobile communication industry have varied rapidly from closed innovation to open innovation at the firm’s level, and from stand-alone innovation to synergetic innovation based on the innovation system viewpoint. Hence, this paper is based on the perception of industry innovation system level to divided innovations into stand-alone closed innovation and systemic synergetic innovation, in order to explore the evolution of innovation mechanism in mobile communication industry.

By generalizing the evolution process of the innovation mechanism in mobile communication, the following trends can be highlighted:

 The systemic synergetic innovation was pulled by the market dynamic forces. There was a need for compatible mobile communication system so that mobile phones could be used around the world. In 1/2G systems, because users could more easily cross national borders in Europe, regional standardization within Europe was considered more necessary than other countries. As a result, the closed collaborative innovation mode was first operated in Europe. After mobile phones had become so small as to be carried in a pocket, many people travelling around the world suffered from incompatible 2G standards adopted by different countries. Therefore, the motivation of users to use the same mobile phone and the same mobile phone number around the world became the dynamics of synergetic innovations under on a global basis (Kano, 2000).

  •   The innovation mechanism was dominated by the international standard organizations such as 3GPP and 3GPP2 since the introduction of the 3G system. The 3GPP and 3GPP2 played a very important role as focal organizations in the ecosystem of innovation to achieve synergies between actors and organizations in the mobile communications industry around the world, such as government, network operators, network equipment manufacturers, handset manufacturers, universities, etc to carry out systemic synergetic innovation for value creation.
  •   The balance between the integration of the mobile communications system and diversification of users terminals is realized by the a two-tiered approach in mobile communications, which defined successive generations of standards and specified the interface specifications between sub -systems in order to alleviate negative effects of standardization on technical innovations (Kano, 2000).

    4.3 Balancingvaluecreationandvaluesharing by synergetic mechanism

    There are two complementary forces promoting the co-evolution of the mobile communication, ie, the technical innovation force and the technology standardization. The force of the technical innovation which dominates market factors promotes value creation for the diversity of the mobile system and auxiliary equipment, while the force of the technology standardization which dominated by regulation factors, guarantee integrated disjointed innovation for value sharing.

    In the previous literature, the government should play the role to coordinate with both the technical innovation force and the technology standardization in search of balance. Such as, relevant government departments should be keen to discover and absorb the value of innovations, and release it for technology standard at the right time, to ensure the space for industrial technology innovation and the reasonable restriction on industry development, but the problem is how can it be certain that the government would make the correct decisions?

    However, the synergetic innovation mechanism, dominated by 3GPP and 3GPP2 as focal actors in the mobile communication ecosystem, plays an important role. The function of the synergetic innovation mechanism, like a resonance between the wave of technical innovation force and the wave of technology standardization, balance the synchronization between them to ensure the diversity and integration of the mobile communication system.


5.1 Discussion

Both technical innovation for value creation and technology standardization for value sharing are very important in the advances of mobile communications. However, the synergetic mechanism is more significant for balancing the value creation and value in a vivid industrial innovation system. The lack of synergetic mechanism in an innovation ecosystem to ensure synergetic innovation, no standard that has gained the first mover advantage can survive from the intense market competitions. TD-SCDMA was based mainly on technologies from Datang who proposed individually in 1998, and was accepted as one of the three international standards by the ITU in 2000 and 3GPP in 2001. The first mover advantages from the 3G standard are tremendous, but until China Mobile officially adopted TD-SCDMA in January 2009, the synergetic innovation ecosystem for homegrown TD-SCDMA had not been established due to a number of reasons, such as the network operators hesitated to operate, network equipment manufacturer Huawei was reluctant to join in at the beginning, most handset manufacturers worried about their investment, and even the attitude of the government was uncertain for a very long time (Gao and Liu, 2012). As a result, the operators of TD- SCDMA such as China Mobile are still searching for a next- generation technology that will overcome the limitations of TD- SCDMA, such as limited/expensive handsets available only in the domestic market, or multiple mode handsets needed for global roaming (Ascom, 2012). So, work on establishing the synergetic innovation ecosystem for 4G TD-LTE, should be the key to the catch-up strategy for the China mobile communications industry.

5.2 Conclusion

By reviewing both the successive generations of standards and the corresponding evolutionary process of the technical innovations in the mobile communications industry from the earliest beginning, the paper reviews the corresponding evolutionary process of the technical innovations comprehensively, and then explores the co- evolutions mechanism between technology standard and technical innovation.

The contributions of this paper are as follows: elicits that the major force of technical innovation was oriented towards value creation and the main dynamics of technology standardization was focused on integration for value sharing. The synergetic innovation mechanism played a decisive role of promoting the performance of technology standardization and technical innovation in mobile communications industry, rather than standardization only.

The conclusions of this paper have important practical implications. For example, the government should realize that the success of the 4G standards and market requires a competent innovation ecosystem encompassing participants in various roles to realize the synergy. In addition, the related businesses should reshape their collaborative innovation strategies based on their network position and should develop new synergistic innovation-based competitive advantages instead of adhering to the paths that were successful in the past.


This work was partially supported by the National Natural Science Foundation of China (NSFC) under the Grant No 71273230. The paper was also supported by the key social sciences research base of Zhejiang province, ie, the Government Regulation and Public Policy Research Center.


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