The Economics of Dominant Technical Architectures: The Case of the Personal Computer Industry

by Ike Chang

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The predominance of a single architectural standard in the personal computer (PC) industry has enabled certain firms to attain near monopoly positions in their respective markets. This paper discusses how Intel and Microsoft obtained near-monopoly positions in their respective markets due to intellectual property rights and how their strong market positions enabled them to innovate beyond their competitors. It is argued, therefore, that public policy motives to limit their market power by weakening the intellectual property rights of market-leading companies such as Intel and Microsoft should not take precedence over the positive role played by intellectual property in inducing such companies to make innovative investments that benefit society over the long run.

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