The effects of technology standards on complementor innovations: Evidence from the IETF

Abstract

Enabling technologies are increasingly important with the arrival of the Internet of Things, blockchain, and 5G networks. They offer numerous opportunities for firms to build complementary innovations across a range of application areas, and the firms who produce them are often called complementors. We argue that standards are critical for encouraging complementor's high-impact innovations, because such standards play a significant role in reducing both technological uncertainty and legal uncertainty. Our empirical results, based on data drawn from the Internet Engineering Task Force (IETF), show that complementors are more likely to obtain high-impact innovations in technological fields that have more standards. More importantly, this effect varies based on the downstream capabilities of developers of enabling technologies and the downstream capabilities of complementors. The standards created by vertically integrated developers have a stronger effect on facilitating high-impact innovations by complementors than the standards created by specialist developers. Meanwhile, the effect of standards is stronger for specialist complementors than for vertically integrated complementors. Overall, our results have important implications for understanding the effect of standards on innovational complementarity around enabling technologies and how different actors in the ecosystem shape these effects.