Standard Setting Organizations and Standard Essential Patents: Voting Power versus Market Power

The key …nding is that Standard Setting Organizations (SSOs) choose e¢ cient technology standards because voting power and market power have counterbalancing e¤ects. Agents on the long side of the market have less added value in the marketplace but more voting power in cooperative organizations and conversely for the short side of the market. In a two-stage model, industry members choose technology standards by voting and then compete in the marketplace. When there is disagreement among industry groups, without Standard Essential Patents (SEPs), SSO members vote for the e¢ cient standard unanimously. In an equilibrium with SEPs, inventors and technology adopters choose e¢ cient standards, although voting may not be unanimous. With disagreements within industry groups, SSO members choose e¢ cient standards Elinor Hobbs Distinguished Professor of International Business, and Professor of Strategy, Strategy Department, Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL, 60208. E-mail: [email protected]. This paper is a substantially revised version of an earlier working paper with a similar title. I gratefully acknowledge research support from Qualcomm and the Kellogg School of Management. I thank Justus Baron, Jorge Contreras, and Manfred Holler for helpful comments.