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

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  • Munirul Nabin
  • Pasquale Sgro
  • Surjasama Lahiri

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.

Suggested Citation

  • Munirul Nabin & Pasquale Sgro & Surjasama Lahiri, 2023. "The role of standard‐setting organizations in deciding product quality and process innovation," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(4), pages 767-786, December.
    • Handle: RePEc:bla:ijethy:v:19:y:2023:i:4:p:767-786
    DOI: 10.1111/ijet.12374
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