The Political Economy of Voluntary Standard Setting
Patents and the Performance of Voluntary Standard
Setting Organizations (with Marc Rysman)
This paper measures the technological
significance of voluntary standard setting organizations (SSOs) by examining
citations to patents disclosed in the standard setting process. We find that
SSO patents are cited far more frequently than a set of control patents, and
that SSO patents receive citations for a much longer period of time.
Furthermore, we find a significant correlation between citation and the
disclosure of a patent to an SSO, which may imply a marginal impact of
disclosure. These results provide the first empirical look at patents disclosed
to SSOs, and show that these organizations not only select important
technologies, but may also play a role in establishing their significance.
Voluntary Standards Setting
Organizations (SSOs) are often instrumental in creating compatibility standards
for technology markets with strong network effects. However, practitioners and
policy makers have expressed concern that the committee decision-making process
used by SSOs is increasingly “politicized” and perhaps incapable of producing a
timely consensus. This paper considers the problem of strategic maneuvering
within SSOs. Specifically, I develop a model of “design by committee” and test
it using data from the Internet Engineering Task Force (IETF)—an SSO that
produces many of the computer networking standards used to operate the
Internet. The empirical results suggest that an observed slowdown in IETF
standards production between 1993 and 2003 can be linked to distributional
conflicts created by the increasing commercialization of the Internet during
that time period.
Choosing the Rules for Consensus
Standardization (with Joe Farrell)
Consensus standardization—explicit
agreement on compatibility standards—is marred by severe delays. We explore
tradeoffs between speed and the quality of outcomes in a private-information
model of the war of attrition. In this model, the consensus process can be
excessively slow—even on an optimistic view of its quality-selection merits.
However, we find that adding “vendor neutral” players can mitigate the tradeoff
between screening and delay. We also show that intellectual property policies
designed to reduce vested interest, and hence delays, do not necessarily weaken
the players' incentive to innovate.
Competing on Standards?
Entrepreneurship, Intellectual Property and Platform Technologies (with
Stuart Graham and Maryann Feldman)
This paper studies the intellectual
property strategy of firms that participate in the formal standards process.
Specifically, we examine litigation rates in a sample of patents disclosed to
thirteen voluntary Standard Setting Organizations (SSOs). We find that SSO patents
have a relatively high litigation rate, and that SSO patents assigned to small
firms are litigated more often than those of large publicly-traded firms. We
also estimate a series of difference-in-differences models and find that
small-firm litigation rates increase following a patent's disclosure to an SSO
while those of large firms remain unchanged or decline. We interpret this
result as evidence of a "platform paradox" -- while small
entrepreneurial firms rely on open standards to lower the fixed cost of
innovation, these firms are also more likely to pursue an aggressive IP
strategy that may undermine the openness of a new standard.
A NAASTy Alternative to RAND
Pricing Commitments (with Marc Rysman)
Voluntary standard setting
organizations typically require participants to disclose their patents during
the standard-setting process, and will only endorse a standard if patent
holders commit to license them on “reasonable and non-discriminatory” or RAND
terms. We argue that this policy is unworkable—the
Explaining the Increase in Intellectual
Property Disclosure (“The Standards Edge, vol. 3”)
This short book chapter documents a
large and rather sudden increase in intellectual property disclosure at nine
standard setting organizations during the early 1990s. It also examines the specificity
of disclosure statements, the significance of disclosed patents, and the
differences between disclosing firms. After considering several possible
explanations for the increase in disclosure, the paper concludes with a
discussion its policy implications.
Open Standards and Intellectual Property
Rights (“Open
Innovation: Researching a New Paradigm” OUP)
This is a book chapter that explores
the tension between collaboration and competition in the non-market standard
setting process—with particular emphasis on the role of intellectual property
rights. The chapter develops a simple framework that emphasizes the distinction
between standards, implementations, and products. The framework is used to
explore a number of factors that influence the efficiency of the standards
developing process. I also develop a simple taxonomy of “IPR strategies” for
standard setting and close with a discussion of the ongoing policy debates
about the hold-up problems created by IPR in standards.
Other Projects
Identifying the Age Profile of Patent Citations:
New Estimates of Knowledge Diffusion (with Aditi Mehta and
Marc Rysman)
A growing body of research uses patent
citations to analyze economic phenomena, and many of these papers are
interested in the distribution of citations over the life of a patent. However,
this question leads directly to the age-year-cohort identification problem,
i.e. co-linearity between the birth year, citation year, and "age" of
a patent. Existing research has relied on functional form assumptions to
separate these three effects. This paper proposes an alternative non-parametric
identification strategy which uses the lag between application and grant as a
source of exogenous variation. We provide statistical evidence to support our
assumption that the "citation clock" should not start ticking until a
patent actually issues, and we examine the potential bias introduced by our
method if the lag between application and grant is correlated with citation
levels. Finally, we use our proposed identification strategy to re-examine some
prior results on the citation age profile of patents from different
technological fields and application-year cohorts.
What’s in A Missing Name? Status and Signaling
in Open Standards Development (with David Waguespack)
How much are we influenced by an author's
identity? If identity matters, is it because we have a “taste for status” or
because it offers a useful shortcut -- a signal that is correlated with the
likely importance of their ideas? This paper presents evidence from a natural
experiment that took place at the Internet Engineering Task Force (IETF) -- a
community of engineers and computer scientists who develop the protocols used
to run the Internet. The results suggest that IETF participants use authors’
identity as a signal or filter, paying more attention to proposals from high-status
authors, and this has a surprisingly large impact on
publication outcomes. There is little evidence of a \taste" for status.
Related Diversification and Outsourcing in the
Taxicab Industry
(with Evan Rawley)
This paper studies how firms reorganize after
diversifying into related businesses. Specifically, we propose that outsourcing
is one way to reduce the coordination costs that arise in multidivisional firms.
We, also, examine the mechanisms underlying coordination costs, and show how alternative
theories lead to contrasting predictions about the link between diversification
and outsourcing. We test these propositions using novel micro-data on taxicab
and limousine firms from the Economic Census. The results show that taxicab
fleets outsource, by shifting ownership of taxicabs to drivers, when they
diversify into the limousine business. Moreover, the magnitude of the shift
toward driver ownership is larger for firms in less urban markets, where the
tasks of taxicab and limousine drivers are similar, but compensation systems
differ. These findings suggest that firms use outsourcing to mitigate
coordination costs associated with related diversification, particularly when
employees in different divisions have heterogeneous incentives or ability but perform
similar tasks.
Disease Management: Helping Patients (Who Don’t)
Help Themselves (with
Paul Gertler)
Chronically
ill patients currently consume a significant share of the U.S. health system's
resources and are a rapidly growing segment of the overall population. Disease Management
(DM) programs identify high-risk patients among the chronically ill, encourage
them to take better care of themselves, and help coordinate the care they receive
from various providers. This paper examines the impact of a diabetes Disease
Management program. We find that it led to increased compliance with clinical practice
guidelines, improvements in patient health, and significant reductions in the
total cost of care. The financial benefits are greater for patients lacking “self
control” prior to enrolment, as indicated by their failure to comply with
generally accepted clinical practice guidelines. These results are especially
important for the Medicare program, which has the majority of the chronically
ill as beneficiaries.
Stata Code
Stata Code for Robust Standard Errors in the Fixed Effects
Poisson Model (in Stata type “ssc
install xtpqml”)
Wooldridge (JOE 1999) shows that the fixed
effects Poisson estimator produces consistent estimates of the parameters in an
unobserved components multiplicative panel data model under very general
conditions. In fact, all that is required is an assumption about the
conditional mean of the dependent variable. This is quite useful for two
reasons. First, it implies that fixed effects Poisson estimation is appropriate
for any non-negative dependent variable—not just count data that follow a
Poisson distribution. Second, the estimator is robust to arbitrary patterns of
serial correlation. In spite of these obvious attractions, the fixed-effect
Poisson estimator does not appear to be widely used in practice. This is partly
because statistical software does not generally allow computation of the
appropriate (robust) standard errors for inference. This ado file runs Stata’s pre-packaged fixed effects Poisson estimator and
then computes the robust standard errors suggested by Wooldridge (1999).
Stata Code for Multinomial Agglomeration/Dispersion Test
Testing for agglomeration and/or dispersion has
become a popular thing to do. One popular test is the “dartboard index” proposed
by Ellison and Glaeser (1998). Another is the
Multinomial test for agglomeration and dispersion proposed by Rysman and
Greenstein (2003). Since neither of these appears to be available in an “easy
to use” implementation, I have written a Stat ado file that implements the
latter. This code is still in Beta testing… use at your own risk!