Public R&D as a Standard-Setting Device

Achim Hecker and Tobias Kretschmer

Industry and Innovation, 2014, vol. 21, issue 7-8, 599-615

Abstract: We propose a simple two-firm model with complementarities and imperfect knowledge about the optimal technology. Firms receive two signals about the technology, a public and a private one. We show that with complementarities public signals can serve as a coordination device between firms, even if the private signal is more precise. Our results point to an important function of standard-setting organizations and public R&D: providing a focal point for firms that might not coordinate otherwise.

Date: 2014
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DOI: 10.1080/13662716.2015.1011914

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