Design Rules Volume 2 How Technology Shapes Organizations – Carliss Y Baldwin

Control of the standard thus passed to a nonprofit consortium. In 2019, PCI-­SIG had over 700 members, and its board of directors included representatives from AMD, Dell/EMC, Intel, Nvidia, Keysight Technologies, Syn- opsys, Qualcomm, and IBM.33 Standards owned by a for-­profit enterprise place users at risk of ex post holdup by the ­owner. By placing PCI (and ­later the USB standard) in the hands of an industry consortium, Intel renounced its rights to profit from the standard.

­Today, a com­pany can use the PCI bus architecture and all its variants for a flat fee of $4,000 per year.34 This nominal amount stands in stark contrast to the 1 ­percent to 5 ­percent of revenue that IBM attempted to charge for using the Micro Channel bus. One Well-­Defended Strategic Bottleneck Is Sufficient Control of the PCI bus was unnecessary ­because Intel already controlled a strategic bottle- neck in the form of the integrated pro­cessor, chipset, and internal buses. As long as Intel’s primary strategic bottleneck was well protected and no other essential and unique compo- nents ­were controlled by for-­profit agents, controlling multiple strategic bottlenecks was redundant.

(Of course, Microsoft controlled a second strategic bottleneck in the form of the operating system. Intel and Microsoft’s relationship is explained next.) In contrast, it was in Intel’s interest to address flow bottlenecks in the instruction paths of hardware and software supplied by complementors. In the early 1990s, ­there was ­great concern among Intel engineers that sales of Pentium chips (first released in 1993) would be held back ­because the ISA bus was too slow to take advantage of Pentium’s speed. If putting an industry association in charge of PCI would hasten adoption of the new bus standard and make PCs faster, Intel had good reason to follow that course of action.

We now turn our attention from Intel to Microsoft, the second sponsor of the Wintel platform system. Microsoft’s Subsidiary Platforms Microsoft’s approach to technical and strategic bottlenecks paralleled Intel’s in many ways.

© 2024 Massachusetts Institute of Technology This work is subject to a Creative Commons CC-BY-NC-ND license. This license applies only to the work in full and not to any components included with ­permission. Subject to such license, all rights are reserved. No part of this book may be used to train artificial intelligence systems without permission in writing from the MIT Press. The MIT Press would like to thank the anonymous peer reviewers who provided comments on drafts of this book.

The generous work of academic experts is essential for establishing the authority and quality of our publications. We acknowledge with gratitude the contributions of these otherwise uncredited readers. This book was set in Times LT Std by Westchester Publishing Services. Library of Congress Cataloging-in-Publication Data is available. ISBN: 978-0-262-04933-7 To my loving and understanding ­family Acknowl­edgments ix 1 Introduction: The Changing Economic System 1 I APPROACHES 2 Foundational Approaches to Understanding Technical Systems 17 3 A New Theory: The Spectrum of Complementarity 41 4 A New Method: Value Structure Analy­sis 71 II PARADIGM SHIFT: FROM FLOW PRO­CESSES TO PLATFORM ECOSYSTEMS ALONG THE SPECTRUM OF COMPLEMENTARITY 5 One End of the Spectrum: Flow Production Pro­cesses and Systematic Management 101 6 Flow Production Pro­cesses and the Mass Production Paradigm 127 7 A Dif­fer­ent Paradigm: Platform Ecosystems 149 8 Moore’s Law, the Semiconductor Industry, and High Rates of Technical Change 183 III HOW DIGITAL PLATFORM ECOSYSTEMS CREATE AND CAPTURE VALUE 9 The Rise of Open Platform Ecosystems: The IBM PC 219 10 Capturing Value in Standards-­Based Platforms: Wintel 249 Contents viii Contents 11 Capturing Value in Modular Production Networks: Dell 277 12 The Globalization of Modular Production Networks 305 13 Capturing Value in Digital Exchange Platforms: Google and Apple 327 IV SOFTWARE AND OPEN SOURCE ­ORGANIZATIONS 14 Software Is Dif­fer­ent 365 15 The Origins and Rationale for Open Source Proj­ects and Communities 385 16 Open Source and Corporations 415 V CONCLUSION 17 How Technology Shapes ­Organizations 449 Notes 479 References 525 Index 571 Many ­people helped to bring this book to completion.

I can only acknowledge a few, but I am grateful to all who helped along the way. First, I would like to thank every­one at the MIT Press, especially Emily Taber and Laura Keeler, who helped during the early stages, and Catherine Woods and Anne-­Marie Bono, who patiently assisted me in preparing the book for production. My thanks also go to Liz DeWolf, who advised me on how to streamline and structure the chapters, and Karen Brogno, who was invaluable in working through the intricacies of copyright and permissions.

This is a short excerpt from the opening of “” by Unknown, quoted for review and introduction purposes. All rights belong to the copyright holders.

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