The role of standard‐setting organizations in deciding product quality and process innovation

Munirul Nabin, Pasquale Sgro and Surjasama Lahiri
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Munirul Nabin: Deakin University [Burwood]
Pasquale Sgro: Deakin University [Burwood]
Surjasama Lahiri: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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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.

Keywords: Duopoly competition; Process innovation; Product quality; Standard‐setting organization (search for similar items in EconPapers)
Date: 2023
Note: View the original document on HAL open archive server: https://hal.science/hal-04922997v1
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Published in International Journal of Economic Theory, 2023, 19 (4), pp.767-786. ⟨10.1111/ijet.12374⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04922997

DOI: 10.1111/ijet.12374

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