The Economics of Standardization

This study, undertaken by the Manchester Business School for the UK Department of trade and industry (DTI), provides an overview and classification of the literature on standardization and different ways of standards setting (formal standards setting process versus consortia process). Standardization is seen as a key part of the microeconomic infrastructure with benefits resulting from cost reduction and quality increases. Although standardization may not raise the profitability of all companies, it is in the interest of the economy as a whole as it induces competition. Standards have a strong element of ‘public goods’ and are, due to their open and rule-based development process, often criticized for the slowness of their development. However, a counter argument against the slowness of this process is to view the development of the corresponding products as too fast, especially if one regards standardization as a tool to help define consumer requirements; thus when innovation rates are “excessive”, manufacturers may not give adequate consideration to consumer requirements. The participation of different interest groups in the standards-setting process is reviewed and a warning is formulated against an over-representation of producer interests. The study concludes that the participation in standards setting bodies needs to be balanced between different interests and emphasizes that governments can play an active role in ensuring such a balance. The standards’ infrastructure needs to be kept efficient and functional to ensure that it can contribute overall benefits to society and fulfil its “public goods” function.


URL (UK Dept of Trade & Industry)

Additional information:

AuthorsG.M. Peter Swann (Manchester Business School, Manchester University)
Other bibliographical information:Final report for standards and technical regulations directorate, Department of trade and industry, London