Standards in Innovation

Role and Impact

Economic Principles

Product Innovation without Standardization

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Horizontal ProductDifferntiation

Product Innovation with Standardization

The Impact of Standardisation

• Knowledge dissemination

• Economises on information

• Supporting innovation

Standards and dissemination• Standards are a good candidate to represent

codified knowledge that firms can economically acquire and apply.

• UK Government sponsored studies of the impact:– Surrey group developed time series based growth

and productivity models.– Professor Peter Swann examined standards in

innovation decisions using standards stock and innovation survey results.

– A German team also worked with us, focussing on cross country and cross sector technology transfer.

Results

• Concluded that technology dissemination via standards had contributed 12% pa on average to UK labour productivity growth since 1948.

• Statistical tests confirmed that standards stock “leads” productivity growth

Standards and Innovation

• Statistical model with 12 sectors across 4 countries.The elasticity of output with respect to the stock of standards a positive and significant contribution whether or not patents – a proxy for innovation - are included as additional explanatory variables.

Do Standards Enable or Constrain Innovation?

• This study uses data from the Community Innovation Survey and the BSI Online database of standards

• Do standards enable, or constrain, or both?• What characteristics of the company influence the

informative and constraining role of standards?• What is the relationship between the informative and

constraining role of standards and the condition of the standards stock, measured by:– Median age of the standards stock?– Number of standards in stock?

Standards as information or as constraints on innovation?

• Paper by Professor Swann establishes that the information content of the stock of standards increases with the number of standards available to an individual producer. It also increases with the age of the typical standard in the stock (i.e. with its median age). There is a limit to this. An increasingly elderly stock of standards begins to reduce the information content.

• it seems likely that both rather old and rather new standards constrain innovation. There is also a non-linear relationship between the contraining role of standards and the number of standards.

• As the number of standards relevant to a sector increases, producers are less likely to find standards as an impediment, but after a point, more standards increase the constraint on innovation

Implications for Management of Standards Stock

• Standards stock needs regular “pruning” to keep the number of standards and the distribution of vintages in “good condition”

• Similar to the metaphor in Swann (2000) that apple trees need regular pruning to maximize fruitfulness in the long term

Caveat ….

• The model of “pruning” is based on average estimates of optimum number and median age of standards

• In practice these optima will vary by sector, but our data set does not make it possible to estimate separate optima by SIC

• Moreover, with continuing innovation, specialisation and growth of intra-industry trade, it is likely that the optimum number of standards will grow over time