Membership, Governance, and Lobbying in Standard-setting Organizations
Abstract: Standard-setting organizations (SSOs) are collectively self-governed industry associations, formed by innovators and implementers. They are the main organizational form to agree on and manage technical standards, and form the foundation for many technological and economic sectors. Constructing a model, we study the incentives of heterogeneous innovators and implementers to join an SSO, which is endogenously formed. We also study the effect of SSO governance on membership incentives and on members' lobbying efforts to get their technologies included in the standard. We show that, depending on parameter realizations, one of four equilibrium types arises uniquely. The results can reconcile existing evidence, especially that many SSO member firms are small. We show that raising the influence of implementers within the SSO increases the standard's market coverage and lowers royalty rates but it erodes the innovators' incentives to contribute to the standard. This results shows how the incentives of both type of firms are conflicting within an SSO and need to be carefully weighted for it to be successful.
