Newsletter > Newsletter No. 01

UK
Empirical economics of standards
2005

This study provides an interesting insight into the impact of standards innovation (part 3). The summary paper, which is an overview of three individual reports provides insights into the impact of standards on growth, productivity and innovation. It concludes that around 13% of post war UK productivity growth can be attributed to standards mediated dissemination of technology, management practices and other knowledge, as part of the innovation system. 

1. Productivity growth due to standardization

This part of the study looks at  labour productivity growth based on data between 1948 and 2002.

2. Impact of international vs. national standards

Examines the impact of standards on productivity growth over the last decade.

3. Impact of standards on innovation

The importance of the right timing of standardization.

 

1. Productivity growth due to standardization

This part of the study was based on the growth of the standard stock, labour productivity and capital-employment ratio. The detailed methodology and calculations can be found in the full overview.

Key findings:

  • Over the period 1948 to 2002 standards have contributed to about 13% of the growth in labour productivity in the UK -  or 0.28%/year
  • Impact of technological change over the same period: 1 %/year – overall growth rate of economy (GDP): 2.5%/year
  • Standards act in conjunction with other factors such as innovation and have significantly contributed to the economic growth of the UK
  • Standards and standardisation activities strongly support the processes by which new technology is adopted

 

2. Impact of international vs. national standards

Examined the impact of standards on productivity growth over the last decade, taking into account the shift from national standards to international standards. It also compared France, Germany, Italy and the UK.

Key findings:

  • Technology change plays a major role in explaining productivity growth
  • Strong shift from national to international standards since 1990: from 64% UK national standards to 26% UK national standards in 2005. In 1990 a very small number of European standards were available, compared to nearly 15 000 by the end of 2003
  • Significant impact from standards in more mature sectors (less R&D intensive)

Overall, the strong shift from national to international standards made it difficult to express the economic impact of standards over the last decade in the UK in absolute terms.

 

3. Impact of standards on innovation

Standards have a powerful influence on the dissemination of information about technology. Economic theory suggests that standards under certain circumstances may impede the innovation process.

Key findings:

  • Timing for standardization is important. Standardisation at an inappropriate time can lead to economic inefficiency.
    • When standardization happens too early, it may shut out promising and ultimately superior technologies
    • When standardization happens too late, the costs of transition may be too high – preventing dissemination
  • Beyond a certain number, more standards increase the constraint on innovation
  • Both rather old and rather new standards seem to constrain innovation. The first locks the innovator into legacy systems and the latter challenges the innovator.