{"title":"The role of standard-setting organizations in deciding product quality and process innovation","authors":"Munirul Nabin, Pasquale Sgro, Surjasama Lahiri","doi":"10.1111/ijet.12374","DOIUrl":null,"url":null,"abstract":"<p>We analyze the effect that the presence of a standard-setting organization (SSO) has on firms' choices of product quality and costly research and development (R&D) investment when consumers face uncertainty regarding product standardization. We construct a theoretical model with competing firms and compare frameworks where: (i) an SSO is exogenously absent and (ii) an SSO is present. Our first finding is a negative relationship between firms' product-quality choices and R&D investment. The presence of the SSO standardizes quality which can be profitable for firms. Finally, we find conditions where the presence of an SSO could lead to welfare enhancement.</p>","PeriodicalId":44551,"journal":{"name":"International Journal of Economic Theory","volume":"19 4","pages":"767-786"},"PeriodicalIF":0.5000,"publicationDate":"2023-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Journal of Economic Theory","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/ijet.12374","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q4","JCRName":"ECONOMICS","Score":null,"Total":0}
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Abstract
We analyze the effect that the presence of a standard-setting organization (SSO) has on firms' choices of product quality and costly research and development (R&D) investment when consumers face uncertainty regarding product standardization. We construct a theoretical model with competing firms and compare frameworks where: (i) an SSO is exogenously absent and (ii) an SSO is present. Our first finding is a negative relationship between firms' product-quality choices and R&D investment. The presence of the SSO standardizes quality which can be profitable for firms. Finally, we find conditions where the presence of an SSO could lead to welfare enhancement.
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