Formal Standards and Firm Inventive Performance in the ICT Industry

This research investigates the role of standardization by examining how formal standards impact the inventive performance of firms in the information and communication technology (ICT) sector. Using a staggered Difference-in-Differences analytical framework, the study explores how standardized technologies influence the inventive performance of two types of firms within the industry. Empirical evidence from the US ICT sector between 1988 and 2015 shows that firms directly involved in formal standard-setting experience a 38% decline in patent production within standardized fields following their successful contributions. However, in non-standardized technological fields, these direct contributors did not demonstrate increased inventive incentives, neither generating higher patent outputs in pre-existing non-standardized fields prior to standardization nor reallocating R&D investments to establish new ones. In contrast, for a broader set of firms in the industry that did not directly participate in standardization, standardized technologies boosted subsequent innovation by 20% for those highly aligned with these standards. The study highlights the variation and complexity in firms’ innovation strategies following industry-wide standardization.