The Superior Performance Of Voluntary Technology Standards

By Jorge Padilla & John Davies

Standards defining how technologies work together have profound effects on market structure and incentives for innovation. They enable suppliers to co-operate and compete in product markets, while allowing diverse contributions to R&D, through a “market for technology.” The governance structure is crucial. Voluntary participation in Standards Development Organizations (“SDOs”) allows innovators and implementers to contribute to standards and license technology with confidence. We describe the economic outcomes but we note they could be lost if rules are changed ex post: by competition authorities or the SDOs themselves. Standards already underpin some of the largest, most innovative industries but will become ever more important with the development of the “Internet of things.”