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Public R&D as a Standard-Setting Device

Authors/Editors: Kretschmer, T.
Hecker, A.
Published: 2014
Type: Articles in Refereed Journals (International)
ISBN/ISSN: 1366-2716
Published by: Industry and Innovation

Abstract

We propose a simple two-firm model with complementarities and imperfect knowledge about the optimal technology. Firms receive two signals about the technology, a public and a private one. We show that with complementarities public signals can serve as a coordination device between firms, even if the private signal is more precise. Our results point to an important function of standard-setting organizations and public R&D: providing a focal point for firms that might not coordinate otherwise.