Effectiveness of the international 3G standardisation process and implications for China's 3G policy

We analyse the international process of standardising the so-called third-generation (3G) mobile communications systems as well as China's 3G policy in order to shed light on the relationship between regulation and innovation. For this analysis, we propose a transaction cost-theoretic framework by distinguishing between two types of transaction costs related to the coordination of the development of new complementary products and services, on the one hand, and to communication of knowledge necessary for evaluating products incorporating new technology from a buyer's point of view on the other hand. Based on this analysis, we conclude that the relationship between regulation and innovation is contingent while proposing that the transaction cost-theoretic framework suggested in this paper – if suitably elaborated – offers a way to gauge future regulatory measures with regard to their likely impact on innovation.