Participation in setting technology standards and the implied cost of equity

Xin Deng, Qian Cher Li*, Simona Mateut

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


This study empirically investigates the financial market's reaction to firms’ participation in standard setting organizations (SSOs) in terms of firms’ implied cost of equity capital – the discount rate applied by investors to a firm's expected future cash flows. Our analysis utilizes a panel of 3350 US public firms and their membership of 183 SSOs operating in a range of technology domains between 1996 and 2014. It shows a significantly lower cost of equity for SSO participants. We then empirically document a causal link between SSO membership and a firm's cost of equity, by exploiting exogenous variations in membership count linked to SSO closures and an instrumental variable measuring SSO availability. Our results underscore the important role of SSO membership in mitigating the perceived riskiness of a firm, particularly when it faces high degrees of technological uncertainty, product-market uncertainty, and information asymmetry.

Original languageEnglish
Article number104497
JournalResearch policy
Issue number5
Early online date4 Mar 2022
Publication statusPublished - Jun 2022

Bibliographical note

Cher Li is grateful for the support by the Economic and Social Research Council [ESRC grant ref. ES/T001771/1].


  • Cost of equity
  • Standard setting organizations (SSOs)
  • Technology standards
  • Uncertainty


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