Harvard NOM Working Paper No. 903214, 2006
The paper looks at how firms behave when setting standards.
Standard-setting organizations can work well, but sometimes firms distort the process for their own reasons.
- Innovation often involves many products developed by many firms. Technical standards describe how the products work so that the firms can coordinate their technology.
- Firms meet with standard-setting organizations such as the Institute of Electrical and Electronics Engineers (IEEE) to choose the technology for the standard.
- When participants agree up front how the process will work, standard-setting can work well to choose the best technology (DSL is an example).
- Sometimes firms try to manipulate the standard to their own advantage; this can result in private agreements that bypass the standard.