Do Markets Prefer Open or Proprietary Standards for XML Standardization? An Event Study

Authors:
Nitin Aggarwal;Qizhi Dai;Eric Walden
Affiliations:
Rawls College of Business Administration, Texas Tech University, nitin.aggarwal@ttu.edu;LeBow College of Business, Drexel University, qd24@drexel.edu;Rawls College of Business, Texas Tech University, eric.walden@ttu.edu
Venue:
International Journal of Electronic Commerce
Year:
2006

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Abstract

Proprietary standardization seeks to increase a firm's market share (pie sharing). Open standardization seeks to increase the size of the market (pie expansion). In order to determine which of these creates more value for a firm involved in standardization, this paper investigates the market value of standardization initiatives, using an event study based on 148 XML schema standardization initiatives collected from the Lexis-Nexis database between January 1999 and December 2003. The results show that financial markets respond positively to announcements of proprietary XML schema standardization, but not to those of open XML schema standardization. Moreover, investors do not develop a preference for open standards over time. These results have implications for the management of standardization strategies and identify future research opportunities.