Innovation Dynamics of Contents for Wireless Broadband Networks

Innovation Dynamics of Contents for Wireless Broadband Networks:
Conflicts and Cooperation through a Network Approach
The information content: an object to define
A technological object: conceptualisation of complexity
In order to holistically grasp the contents available in digital networks, we will first focus on their similarity
(technology) for introducing later an analysis of their diversity. Thus, at this preliminary step, we will deal
with technology as the unit, the individual, of our analysis; while the content, as a technical object, will be
conceptualised through a vector of various technologies (not exclusively digital). Consequently, these
contents are concretely products and by-products from software and copyright-based industries, with the
common attribute to incorporate digital technologies1 (Mabillot, 2006).
technology
knowledge
Information content
Figure 1 : diagram of interactions between content, technology and knowledge
A social object: technological knowledge and institutional design
We will now give life to these contents (as technological vectors2) by incorporating them into human and
collective action. But before, we have to explain the reason why we use the term of information content
rather than information good3 which is more common (Varian, 2004). Thanks to our matrix analogy, the
initial content has become a container. Information good is thus a correct denomination to depict the
autonomy of the studied object.
But, by converting this good as a social object, we study a defined object, of course, and also a space of
organised knowledge (Bourdieu, 1982; Lessig, 2005). We are indeed studying a complex and systemic good,
catalyst of knowledge necessary for innovating (concrete like technologies and abstract like routines, knowhow, …) and — more widely — catalyst of knowledge necessary for using (concrete like the operation
manual and abstract like routines, know-how, …). Let us look at the example of Google Web Search. This
information service is :
1
Let us note that for most of cultural goods and service, the digital technology is just to digitise objects, pre-existent
under non-digital forms (books, disks, film stock, and so on).
2
See figure 1.
3
It refers to the Economy of Information and includes all the goods which could be digitised.
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a technological vector of databases’ processing tools (data collecting, query coding, graphic
interface, …),
demanding that his originators knows perfectly the rules of websites’ expansion and their utility for
the users (for the Google’s example, it refers to the number of links’ ranking),
and demanding finally that the users have such know-how (how to write a query, agree for some
advertisement, trust in Google rather than another Web search,…) which give a social existence to
the information object.
Mostly, this digital object structures and is structured by specific knowledge (concrete) linked to the object
itself and by generic knowledge (abstract) about the surrounding/interacting world (Antonelli, 2005). A
central concept we need now to have in mind is institutions. Information goods are invisible (immaterial),
some general knowledge (scientific and/or cultural) is used to index, organise and diffuse the stream of
information available on communication networks (Brousseau, 2001). For example, we use Google because
we know (with such a scientific rationality) that we cannot find information on the Internet only by adding
a “.com” or by consulting it from hyperlinks to hyperlinks. We also have a cultural belief (from a collective
dynamic) that Google provide good results.
The institutions therefore give a general framework to organise the abstract knowledge of networks and
contents that is collectively accepted. They also shape the productive process through the way technologies
are produced, diffused and receipted4. This is the reason why we prefer the term information content to
make explicit the content’s interactions with knowledge and institutions.
An economical object: sector, market and institutional design
All these considerations do not help us yet to clarify the economical object we are studying. Therefore, we
will now introduce its attributes as a product (through a market). The aim is to draw a framework more
complete than the mere example of Google. We lean on the work of the OCDE’s Working Party on
Indicators for the Information Society (IIS), based on the view of UN Statistical Commission (UNSTATS,
2006) summarised through the International Standard Industrial Classification (ISIC).
Our subject corresponds with the term Information Society that OCDE (2005, 2007; Coutinet, 2006) splits
up into “ICT Sector” and “Contents Sector”. The ICT Sector’s candidate must offer products which
enable/fulfil the function of information processing and communication by electronic means, including
transmission and display. The Content sector consists of industries which produce Information Content
Products. Content was defined as an organised message intended for human beings, resulting from an
organised production activity, combined with, or carried by, a medium (OCDE, ibid.). Its value for users is
based on informational, cultural, educational and entertaining aspects.
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For Google, technology was first based on academic processes and communities. It is yet based on industrial and
economics processes.
2
These various products refers to the J category “Information and Communication” in the UNSTATS’ ISIC. So
we can hope that data and knowledge will be operational and standardised in the near future and for most
industrialised countries. Moreover, thanks to this category we keep a distinction between software
industries5 and cultural industries.
But this framework of sectors is not yet complete and fully satisfactory regarding our concepts (Fligstein,
1996; Theret, 2000; Coriat, 2005)). The sector is indeed prone to a fast rhythm of innovation (content may
appear then disappear in a few months) exacerbated by strong collective dynamics, particularly on the
demand side. The latter refers to the institutions and, also generally, to historical trajectories. Through
beliefs, practices… specific uses of networks make sense for a specific community and/or a specific period
without any certainty of their durability. However that may be, networks remain and keep increasing
(Odlyzko, 2001). Thus, in the beginning of the Internet, we observed a competition between portals and
web search. The former had the advantage of quality; the latter had completeness. But following the
proliferation of websites, web search is now preferred without any certainty of good prospect.
Commons
(voice, culture, …)
Software
(productive, leisure)
Online Media
(TV, radio, press, …)
Traditional eCommerce
(Walmart.com, ...)
Multimedia Software and
Database
(video game, edutainment,
cultural database, …)
Infomediation Service
(Web portal, Web Search,
Web Comparison, …)
Interactive and Multimedia
Information Content
Software of interactive interface
Copyright based
(audio, video,
text, …)
Multimedia
Information Contents
Software of multimedia interface
Basic
Information Contents
Interactive Media
(VoD, P2P, ...)
Interactive eCommerce
(eBay, Amazon, etc.)
Interactive Software and
Database
(forum, online workstation,
MMOG, ...)
Telecommunication
(videophone, telephony, ...)
Figure 2 : Diagram of information content through a technological view
In this aspect, a market cannot just be defined by products, particularly in our studied case where products
are immaterial and extremely differentiated. The only consistency lies in the technological paradigm rather
than in seeking a sector or market which is actually the total of many, as shown on the figure 2. This is why
we will also take into consideration the strategic, conflicting and historical behaviour of the actors, as well
as the surrounding institutional and social world.
5
Which hold a productive side and a leisure side.
3
The industrial and innovation dynamics of information content
A static view: modularity and network
At this stage of the analysis, the studied object became complex. In reference to complex systems (Simon,
1962) we will try to break up questions of every subset without losing sight on the global logic of the
system and its institutional embeddedness.
Information contents are complex and systemic goods, which have the properties to be modular,
complementary, cumulative and so on. To produce them and knowledge around them, it is necessary to
coordinate complementary and heterogeneous knowledge and skills (Bargigli, 2005; Brousseau, 2004;
Henderson, 1990; Langlois, 1999). This coordination is a collective, localised and historically determined
process. Thus the firms have to develop strong interactions between them: horizontally (critical mass,
standardisation, …), vertically (share of skills, …) and sideway (modularity, complementary technologies, …).
We will consequently go into the details of networked industries. The first subsets of the network are the
firms which share their skills, knowledge and products to get, by integration, general information content.
They are the major nodes of the network. Then the network is shaped by the relations (links) which
consolidate and structure the system. Two kind of form appear: a centred form and a geodesic form
(Callon, 1999).
The centred form is relevant to analyse industrial relations. They are either hierarchic or not hierarchic
according to the existence of a central integrator/architect, who coordinates the subsets into a general set.
Its role is not the result of a game of chance, but the result of the modularity property. A coordinator seems
to be a leading player in the network. Indeed, three levels appear into the interfirm coordination, by
analogy with Baldwin and Clark, “modularity in conception, production and use”:
in conception : internal conception is independent while modules must have consistency between
them;
in production : modules are produced separately (logic of diversity and flexibility), but the firm have to
position its product in relation to a standard, which defines the diversity of possible integrations;
in use : final product has to be flexible and simple. The price must take account of an income for all the
actors.
However, the presence of modularity properties within products does not determine closely the existence
of modularity within organisation. At this stage we only know for sure that an architect is necessary, but we
do not know its place and/or its form within the network. Indeed, modularity does not condition the
presence of a network, a multidivisional firm could serve for this purpose. Nevertheless, the concept of
network allows us understand the industrial dynamics more deeply than the opposition between market
and hierarchy (Ben Mahmoud-Jouin et alii., 2004). Likewise, this concept may help us to develop an
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intermediate analysis between macro and micro levels.
Moreover, the geodesic form of networks — when the actors have peer to peer relations without a central
coordinator — helps us to sketch out a representation of a superior network in which the centred network
is located at the heart. Indeed, the geodesic form lets us introduce a wider diversity of actors : the
innovation system through the firms of the centred form, as well as investors and institutional actors (State,
public authorities, trade unions, education,…).
This systemic view, as a collective process, conduces us to introduce the concept of proximity. The
proximity means that it is easy to interact, through many forms: same localisation, same way of
thinking/acting, same organisation, and so on. It also results of a social and historical process of translation
and attraction between heterogeneous actors. The idea is that proximity is a good tool to define relations
and we will enhance this concept thanks to empirical observations (Brossard, 2007).
Finally, we hold the framework of a complex system (information content) containing a formal network of
industrial firms which contains itself within a general system of innovation. This general system gives social
sense to the information content. But the major interest now lies, when we focus on a dynamic analysis.
A dynamic view: history, power and conflicts
We now have to add some hypotheses in order to treat the dynamics. Firstly, to achieve the collective
process of information contents’ innovation, it is necessary to coordinate heterogeneous actors in a dispute
about aims: competitors, politicians, regulators, industrials from other sectors and so on. Here, power is a
fundamental problem. Secondly, History matters. This means that the ways to solve conflicts are formalised
over the time into institutions and by retroactions this will modify future decisions. To simplify, we will
schematise history through a succession of two periods: emergence and then exploitation. The first is a
period of instability, when the innovation is not yet widely developed and the uncertainty is strong. The
second refers to the stability age, products are standardised and/or generic, uncertainty is weak and the
innovation appears in the margin (Callon, 1999).
The historical evolution of coordination : networks as an emergent form
During the exploitation period, relations and products remain stable. The transactions could take place in
the firm or in the market. Coordination is easy as long as information on products is widely known and
dispersed. Using the market, the firm will lose, bit by bit, its ability to radically innovate. On the one hand,
because innovation falls back on modules, the central firm benefits no more on mutual learning. On the
other hand, the central firm locks in trajectories which reduce its world of potential innovations. We can
even put into perspective this lack of reactivity, regarding improvement of productive and organisational
processes. The firm could use this as barriers to entry.
But the competition is rough and responsive within the production of the information contents by
continuing to renew innovations. The stable period is quickly succeeded by a unstable one. The central firm
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could buy the module’s producers, according to a multidivisional firm. Thus, it incorporates the innovations
in its production. But this strategy also increases the nervousness of the organisation, if a division
producing an outdated module have to close, at any moment. This close-up causes losses of material and
immaterial investments, and reduces cohesiveness within the firm.
This is the reason why, networks, through their flexibility and cooperation, are good compromises during
the exploitation period and quite a leading concept for the emergence period. Sharing and appropriation of
knowledge are of major importance for the firm’s success. The concept of network seems to be a good
entry to describe this complex arrangement of alliances, financing, integrations, proximities, social
networks, industrial trajectories etc.
The different scales of network
Now that we can better see the network concept’s utility, let us examine deeply the forms of links and
nodes. Firstly, within the central circle of firms (those directly involved in innovation and production), two
institutions shape the network’s form, according to an open or a proprietary architecture of the
technology:
open architecture: the interface is collectively modified at any moment and any firm, as for the
modules. Every firm can analyse and modify the functioning of every module to increase the global
utility. This common work correspond with the first stages of the Internet and is maintained in the
servers architecture and open source communities;
proprietary architecture: the network’s form is more centralised and hierarchic and depends on the
motivations of the property right’s owners. The argument in favour of this strategy lies in the security
of the system and its cohesion.
Up to now, we have not talked about compatibility, considering whether an interface is sufficient. However,
compatibility is a major issue for all the contents available on the networks. The principle is that
compatibility must provide accessibility to installed infrastructure and maintain this access over time and
even exclude competitors. Likewise, firms may adopt a generic interface (a standard) to save the cost of
developing alternative networks.
Nevertheless, the appearance of standards is rarely an outcome of coordination, but rather the result of
competitions. There is no certainty of the success of a standard. We only know that once the standard is
installed there are few opportunities to exit. To prevent such irrationality, Internet standards are ruled by
decision-making groups (W3C for example). Thanks to this, every firm (of whatever size) can produce
content for the internet. On condition that the Internet protocols are observed, the firm knows that
anybody online can access the content according to the architecture originally specified by the producer.
As a matter of fact, exogenous or endogenous compatibility do not solve all the problems of the innovators.
Indeed, innovation involves an effective ability to share knowledge among the different actors of the
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industrial network. But knowledge is also a source of power. At any moment, the network could disappear
in functions of actors’ arbitrations to cooperate or not.
Network as a complex system of heterogeneous actors
To conclude, we are going to evaluate the set of actors within the network. Up to now, we only considered
the central network as a group of firms. But some specificity comes to light when we observe the skills
necessary to innovate and produce information content. Firstly, the network has to incorporate firms with
telecommunications skills in order to ensure the novelty and the functioning of the content over the digital
networks. Secondly, the network must associate some content-editors and distributors, if it wants to use
some proprietary contents (news, movies, music, databases and so on). These various actors and relations
are simplified (in a certain way…) in figure 36.
This partnership could be reduced to simple interfaces. But partners could find interest in exchanging some
specific knowledge from their sector. This strategy is advantageous for the network and also for the other
sectors which could benefit from leanings. It depends on the ability of the network to support the
pervasiveness.
Final Services
Institutional and/or
Regional Environment
Potential
architect
Communication
Networks Operators
(Telcos)
Productive Network

Network Infrastructures

Content Providers

Content Producers
Investors
Telecommunication
Industries
Culture, Media and
Software Industries
Figure 3 : Architecture and Environment of the Network
The network must then create partnerships with some investors to achieve the project. These interactions
are very complex because investors have to finance steps in the general project as well as in each module.
So, the entire framework which has been drawn has to be called up to analyse the financing relations.
These relations refer to a certain amount of stylised facts:
6
The “,,” show the major relations that this thesis aims to analyse particularly, within the global set of relations.
Of course, the “productive network” is also at the heart of analyse.
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the attributes of firms within the network : the financial relationship is different according to the size
and the maturity of the firm;
the attributes of links between the firms : the power of the central/architect firm determines the way
that the other firms access external resources (the architect could centralise the funding of the
project);
the attributes of the innovation: the investors are different according to the innovation form. A radical
innovation causes more uncertainty than cumulative improvements.
In addition, the funding of innovation may be generalised through other stylised facts: existence of public
funding, large amount of public policies and stimulations, lack of bank funding, leading role of venture
capital, private equities and business angels, preference for self-financing, …
Questions and methodology: coming and going among the empirical and
theoretical
Questions and issues
We are now going to mark out the specific issues of this thesis. Two main issues appear: we will first
analyse the forms of the static network relations within the productive and innovative firms; then, in a
dynamic view, we will study the evolution of the relation over the time and across the sectors, particularly
on the financial side.
In other words, this PhD deals with a main question which then leads to some minor questions:
what kind of network approach is relevant to analyse interfirm relations in the purpose of the
production and innovation of information contents?
In which extent can this approach be applied generally: throughout all the innovative and productive
process, or does it only make sense during some specific steps?
As producers of digital content available on networks are used to take advantage of digital networks,
did they originate new ways of producing which will spread over all sectors?
For a PhD thesis, such issues cannot of course be applied to the whole set of information contents. As we
mentioned before, the concept of market or sector is not relevant to the world of information contents and
we should rather use a technological view. So, this technology (or set of technologies) must be relevant in
applying theory and also offer wide ranges of data.
Moreover, the studied information content should be quite complex. The aim is to increase the certainty of
finding interfim relations and innovation on a major scale and renewals. Besides, we will not study purely
cultural or public contents, because of their specificities which take us away from our initial issues. This is
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why we decide to focus on wireless telephony. These technologies help us define a limited amount of
actors without limiting ourselves to a specific network. Wireless telephony uses a specific infrastructure to
access various networks (voice, Internet, Medias, Intranet, and so on) and broadcast very specific
information contents7. Another choice would have been to restrict our analysis to the recently developed
wireless broadband.
Methodology
Our objective is to develop an analysis from a static and general view to dynamic projections of diversity.
Such an analysis transits different stages and questions through the previously drawn framework:
Interfirm alliances, why?
o
A constraint of compatibility: open vs. proprietary architecture, war of standards, …
o
A technological problem: critical mass, bundling, differentiation, …
Interfirm alliances, how?
o
Explicit alliances: joint venture, strategic alliances, network of firms, …
o
Implicit alliances: communities, social networks, regions, …
o
Complex alliances : implicit and explicit with a financial side
Interfirm alliances, when?
o
Temporal alliances: what continuity? What break?
o
Evolutive alliances: a problem of productive steps.
Interfirm alliances, where?
o
Industrial network specifically for digital network industries?
o
Modularity as technological solution or dominant design?
To achieve such analysis, we should make the coming and going between theoretical thoughts and practical
watching. The objective is to avoid from an analysis too much microeconomic (about interchangeable
individual firms) or too much macroeconomic (about generalisation of facts though historically,
technologically and spatially marked).
The theoretical side calls for links between various, heterogeneous, even contradictory thoughts. The
general framework is, of course, Industrial Dynamics at which we can add other thoughts from the
Sociology (innovation and networks), Management, Law (property right), History and so on. More precisely,
the required literature deals with networks of innovators, innovation systems, architectural innovations,
knowledge dispersion and so on. The studied technology guides us to specific literature like Net-Economics,
Economics of Information, Digital Economics and Economics of Telecommunications Networks, which helps
us to get onto issues of information contents.
The empirical side lies in screening data and databases. Such databases exist for alliances as well as for
7
Most of the wireless telephony contents have to be specifically produced, in order to cope with the small size of the
screens, weak opportunities of the keypad, specific uses for working as well as for leisure.
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investments. These give us numerous data to make quantitative and qualitative analysis about nodes and
links in the network : measuring alliances, stylised facts about specific alliances for specific conditions,
identities of actors, and so on. We can also survey actors to identify reasons to ally or not, and how to ally.
When these identifications are done, we will also build static models of networks through graphs (pajek,
ucinet, …) and dynamic models of the trajectories of networks through agent-based simulation (LSD). The
interaction of statistical and mathematical approaches conducts us to econometrical analyses if the
databases allow it. In addition, this thesis must reach theoretical results regarding the economical analysis
of networks. That’s the reason why we have to maintain a relevant geographical scale. Our choice is to
focus on a European scale and probably some comparisons between European nations.
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