How Do Open Standards Influence Inventive Activity? Evidence from the IETF

Abstract

We examine how standardization in the information and communication technologies affects the inventive activities of firms that do not contribute standards but potentially produce to the standards. In the context of the Internet Engineering Task Force, we find that as a technological area releases 100 more open standards contributed by commercial firms, non-contributing firms have 18%-20% less inventive output in the same technological area. This negative effect of standardization in a technological area is stronger when the standards-contributing firms hold a large fraction of complementary intellectual property rights (IPR) in the area, but is somewhat lessened when the ownership of complementary IPR is highly concentrated among these contributing firms. These effects are also stronger (more negative) on the inventive activity of small firms. In contrast, we find that increases in the number of standards developed solely by academics and others associated with noncommercial entities are positively associated with inventive activity.