Do technology standards induce innovation in environmental technologies when coordination is important?

Abstract

A next generation of innovation in enabling and complementary green energy technologies is needed to further accelerate the decarbonization of electricity systems. Few studies have investigated the policy determinants of innovation in this sector to glean insights on how governments may support the development and deployment of these technologies. Policies that were successful at supporting the first wave of renewables innovation may not be sufficient to produce similar results in the next wave of green innovation since those face higher coordination challenges. Using the case of smart grid technology, we investigate the effects of interoperability standards, an instrument that may facilitate coordination through establishing common technological frameworks, on inventive activity. Using firm-level analysis, we find that on average standards decrease firms' patenting activity. We further find that this negative effect is driven by firms with high patenting intensity, whereas standards enable the entry of new firms into the field. We further find suggestive evidence that standards improve innovation quality.