Summary: Standards and Innovation

Below is the executive summary of the 'Standards and Innovation Report.' This is the first stage in NSSF Research Project and has the objective of providing the economic arguments and evidence base for the role of standards in business and in the economy more generally, including the innovation system.

Executive Summary

This paper applies an extensive body of business survey data to analyse the role of standardisation in national innovation performance, at a depth that has not been possible before.

The most striking results are that, contrary to popular assumptions, standards of different types promote and enable innovation in the economy as a whole, even amongst firms who perceive standards and regulations to hamper their individual innovation efforts.

Standards achieve this positive impact by:

acting to inform firms cost effectively about technological opportunities and how to implement them, enabling lower costs of production and development
raising the confidence of buyers and sellers about product and service specifications and performance and thus increasing the size and growth rates of the market and supporting competition
standards as technical and market information work in conjunction with other resource inputs to innovation ? investment and skills. They represent an
essential glue in the innovation system of the UK.
Standards distribute established and best practice information and in this way support most types of innovation in products, services and production and distribution processes. As expected, they make less contribution to entirely novel innovations that are based on new knowledge generated within the firm or leading edge research.

The validity of these outcomes is supported by both straightforward and more sophisticated statistical analysis.

Summary

Standards are a core part of the infrastructure that supports efficient innovation. They provide a focus for critical mass effects in product and service markets.

Standards can effect innovation through a variety of mechanisms. They form an important part of the framework conditions for business and influence the possible routes to market or legal validity of market offerings. As codified information, standards serve to spread knowledge of the requirements for market acceptability and contain quite explicit technical information, reducing uncertainty for both producers and customers.

They promote and enable the diffusion of technology in a form that is readily assimilated by firms with the complementary capabilities to take up and use the new methods.

Standardization leads to innovation

The evidence adduced here supports the view of well implemented standardization as a contributor to innovation and thence to economic growth and productivity. But meeting standards and regulations can also be perceived by business as a constraint on their ability to undertake certain forms of innovation.

Many firms report finding meeting standards and regulations to be factors hampering individual innovation projects. But these firms also turn out to be more innovative than those not recording hampering effects.

There are two reasons why this is an apparent and not a real paradox. One is that what the individual business perceives as a limitation may be of benefit to the national innovation system and thereby to overall economic performance.

Standards enable larger markets and competition, so individual firms see a smaller market share and more competitors than they would like. But this diversity faces customers with more but more compatible choices and lower prices, promoting their economic welfare.

But the joint innovation promoting and hampering effects of standardization can also be reconciled by their interdependence as the constraint effect directs investment into certain paths, leading to more credibility and critical mass in markets for new technologies, thus creating an infrastructure for future innovation.

Around 60% of all enterprises who invest in innovation are users of one or more types of standard as a source of technological and market information. The share accessing standards based information increase with business size, with over nearly 80% of large business units citing a standard as a source for innovation.

Only 25% of businesses who are not active in innovation record finding standards a valuable knowledge input. Enterprises using any form of standard/regulation as knowledge inputs are more likely to introduce new products (including services) or processes to the business, than non- users.

Further information

Bullet-point Download the report (PDF 151KB)

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