METHODOLOGY TO ASSESS THE ECONOMIC BENEFITS OF CONSENSUS-BASED STANDARDS
Assessing Economic Benefits of Consensus-Based Standards - The ISO Methodology [PDF, 570kB]
Economic benefits of consensus-based standards - The ISO Methodology [Powerpoint presentation in PDF, 1.6MB]

Abstract
Substantiating and quantifying the economic and social benefits of consensus-based standards is key, both for the monitoring and prioritizing of standardization activities and for communication purposes, in order to encourage support and involvement from public, private and societal stakeholders at large.

Several studies have been developed by national standards bodies and other external research teams and many of them are listed in the repository available on the ISO/IEC Information Center web site. A great diversity of approaches has been followed, from macro-economic assessments to studies related to the economic impact of individual standards, or suites of standards.

The "Methodology to assess and communicate the economic benefits of consensus-based standards" developed by ISO with the support of Roland Berger Strategy Consultants (RBSC), proposes a general framework for the economic assessment of benefits of standards. which can help the design and development of such studies and allow better comparison of results, supporting benchmarking and identification of general trends.

The methodology has the following three objectives:

• to provide a set of methods that measure the impact of standards on organizational value creation with an emphasis on business organizations;
• to provide decision-makers with clear and manageable criteria to assess the value associated with using standards; and
• to provide guidance on developing studies to assess the benefits of standards within a particular industry sector.

Deliverables
The main deliverables from the project include:

• the Methodology Guide, which provides information about the theory behind the approach and details how the methodology can be applied to a company (from the private sector), to an industry sector, and how it can be adapted to deal with organizations from the public sector;
• the Methodology Toolbox, which provides a number of relevant methods and tools to manage the analysis;
• the Implementation Guide, which provides information and suggestions with regard to the application of the methodology to assess the benefit of standards for a company and an industry sector, following a step-by-step approach;
• the report “Economic Benefits of Standards in the Global Automotive Industry”, which represents an example of the implementation of the methodology for a specific industry sector.

Key findings of the first application of the ISO Methodology
The ISO Methodology has been applied in 2009 for the first time and on a pilot basis to one specific industry sector. The global automotive industry has been selected for this purpose.

As required by the methodology, the industry has been analyzed to determine its key characteristics and trends. 

A comprehensive field study among car manufacturers, suppliers, service providers and dealers covering over 40 companies in 13 countries was then conducted. The role and impact of consensus-based standards in the industry was analyzed from various perspectives.

Most companies assessed during the field study have confirmed the importance of standards and the direct impact on sales and costs. Standards have been shown to have significant relevance in the automotive industry with its complex products and value chain, the complex international division of labor and the high degree of regulation.

The estimates of economic benefits of standards vary, but consistent figures have been found for the three business functions most significantly impacted by standards (Engineering, Manufacturing and Procurement), both for vehicle manufacturers and parts suppliers – with values ranging from 0.5% to 2.5% of total sales.

Projecting these figures to the worldwide automotive industry show, as a preliminary result, that the benefits of standards range between 28 and 55 billion USD per year.     

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ECONOMIC VALUE OF STANDARDIZATION
http://www.scc.ca/Asset/iu_files/Econ-Value-Standztion_FinalReport_e.pdf

Abstract
The Standards Council of Canada (SCC) retained The Conference Board of Canada to undertake a study to examine the impact of standardization on the Canadian economy. The study was based on research methodology that was originally used in Germany (DIN 2000) and the United Kingdom (BSI 2005) and adapted to the Canadian situation.

The study involved four components: a review of the standards-oriented economics literature; an empirical analysis of the impact of the Canadian collection of standards on Canadian labour productivity; a series of interviews with senior executives from the private and public sectors; and an in-depth examination of the benefits of specific aspects of standardization in two Canadian companies.

Key findings
The empirical analysis clearly showed that standards play an important role in enhancing labour productivity, measured as output per hour worked. Over the study period of 1981-2004, standardization accounted for 17 per cent of the growth rate in labour productivity which translates into approximately 9 per cent of the growth rate in output (real GDP). The impact, over time, of this positive contribution to output growth is substantial. In 2004, the level of economic output (real GDP) would be expected to be $62 billion lower if there had been no growth in standards over the 1981-2004 period.

The findings from the interviews provided significant qualitative data in support of the benefits of standardization. Interviewees underlined the benefits of participating in the standards development process. They also mentioned the importance of standardization as the basis for continuous improvement, innovation and new product development. Interviewees indicated that standardization helps to establish a level playing field for business and without quality management standards that bolster and validate credibility, many would not be in business.

The study also examined the benefits of specific aspects of standardization in two Canadian companies, SaskPower and INFASCO. In one instance, ISO 14001 and its benefits were examined; in the other, ISO 9001 and ISO 17025 and their benefits were analyzed. The case studies provided useful insights into the rationale for standardization, the challenges of implementation and the rewards of achieving and maintaining certification and accreditation to ISO and IEC standards.

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STANDARDS, INNOVATION AND THE AUSTRALIAN ECONOMY
http://www.standards.org.au/downloads/11-04-2007-Standards_and_Innovation.pdf

Abstract
The report, Standards, innovation and the Australian economy, undertaken by the Canberra based Centre for International Economics studies the impact of standards on the Australian economy. It is part of Standards Australia’s submission to the Australian Productivity Commission research study into the relationship between the Australian Government and the Australian standards and accreditation infrastructure. The report investigates both the micro and macro economic impact of standards. Mr John Tucker, Standards Australia CEO, said that the conclusions drawn make a clear case for the benefits of standards to the Australian economy. “This report, for the first time, puts a dollar value on the impact of standards across some of our most important industries and also measures the economy wide benefits.” “And the result is clear: standards are helping generate profits and creating jobs in Australia.”

Key findings
The macro level study examines standards at an aggregate level, using a statistical approach that tries to explain changes in economy-wide productivity. It indicates that there is a relationship between the stock of standards and productivity:

- Over the 40 years to 2002 a 1 percent increase in the number of Australian Standards is associated with a 0.17 per cent increase in productivity across the economy.

- Additionally, standards can be considered, together with R&D expenditure, as contributing factors to the stock of knowledge, and the study finds that a 1 per cent increase in this joint stock of knowledge leads to a 0.12 per cent increase in economy-wide productivity.

At the micro level, case studies further indicate the effects of standards. Four groups of standards are examined including: sample standards in the mining industry; standards in water and electrical industries; and the risk management standard.

The report finds that water and electrical standards generate economic benefits of around $1.9 billion a year while mineral sampling standards generate benefits between $24 million and $100 million a year.

Other demonstrated benefits are that standards:

• Distil and diffuse knowledge;
• Provide a common language for discussion;
• Underpin markets and help solve some externality problems;
• Underpin innovation and knowledge dissemination;
• Reduce costs of production and increase productivity;
• Help provide safety outcomes and assist with risk management.

The findings are consistent with similar studies undertaken by in Britain in 2005 and in Germany in 2000. Like these studies, it is based on limited data.

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WORLD TRADE REPORT 2005: STANDARDS, 'OFFSHORING' AND AIR TRANSPORT
http://www.wto.org/english/res_e/reser_e/wtr_arc_e.htm#2005

Abstract
Written by WTO economists, this report underlines the important benefits that standards can deliver in terms of information for consumers, environmental protection and compatibility of related goods and services. It also draws attention to the fact that technical standards can also be used as protectionist measures and can result in higher operating costs for developing country producers.

The report points to the growing importance of international standards and identifies ISO and its partners the IEC (International Electrotechnical Commission) and the ITU (International Telecom-munication Union) as the most important of the 49 international standardizing bodies.

It explains the increase in standardization activity by, among other factors, demand by consumers for safer and higher quality products, technological innovations, the expansion of global commerce and the increased concern of many governments and nongovernmental organizations with regard to social issues and the environment, stating that standards have played an important role in fulfilling these needs. While the private sector provides the strongest impetus to develop standards, the report points out that nongovernmental organizations have become involved, working with industry and international organizations to develop standards in such areas as the environment and corporate social responsibility.

The Report focuses on three key areas:

a) The economics of standards in relation to international trade: The need for standards and the role they play in economic activity is examined. Standards provide scope for achieving economies of scale and network externalities. They increase economic efficiency by enhancing compatibility among products and providing information. They serve important public policy goals in solving problems associated with imperfect information and negative externalities. Standards are compared with other economic instruments available to firms and governments. Then the likely impact of standards on international trade is explored, taking into account the functions of standards and the needs that they meet, and the conditions under which standards are likely to create or impede trade. The role of harmonization, equivalence and mutual recognition in reducing the trade-hampering effects of standards is then examined. Finally, the available empirical literature on the relationship between standards and trade is reviewed. Questions addressed include the impact of standards on prices, costs, trade volumes and social welfare.

b) The institutional setting in which standard-setting and conformity assessment occurs: The report describes how national standards are developed in practice and who designs them. It finds that standards development involves a diverse group of actors from government bodies, industry groups, consortia of firms, individual companies and NGOs. A description is also provided of the international architecture of conformity assessment and standardization, which is relevant to the national context and the overall standards regime encountered in trade. Finally the specific problems faced by developing countries in complying with the requirements set in the advanced countries are discussed. It is underlined that improving the participation of developing countries in international standardization is “crucial”.

c) The role of WTO agreements in reconciling the legitimate policy uses of standards with an open, non-discriminatory trading system: The report relates the economic analysis of standards to the relevant WTO legal tex xts – GATT 1994, the TBT Agreement and the SPS Agreement – and related jurisprudence. The major provisions of these Agreements are identified and it is shown how, taking into account the public policy objectives underlying standards, the provisions reduce the threat of standards being used for hidden protection or discrimination. It contains detailed analyses of the extent to which the major economic principles underlying the role of standards are reflected in WTO agreements, and ultimately in WTO jurisprudence.

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THE EMPIRICAL ECONOMICS OF STANDARDS
DTI economics paper No. 12, London

Abstract
This study, commissioned by DTI, is a very important contribution to the analysis of standardization's impact, as it is one of the most recent and comprehensive aiming to quantify the value of standards to the economy. The document presents the results of an investigation of the role and impact of standardization on economic performance, especially on growth, productivity and innovation in the UK. The overall programme consisted of three projects: Benchmark estimates of the impact of public standards upon technological change using UK data; Standards and the international transmission of technology; and Do Standards Enable or Constrain Innovation?

Developed by a research team from the University of Surrey, the Nottingham University Business School and the Fraunhofer Institute for Systems and Innovation Research in Germany, the report quantifies the extent to which standards enhance products and services, build trading relationships, improve management practices and help organisations to reduce risk. As a result, the research shows that standards are a key driver of growth and labour productivity across the economy. The findings also reveal that they help drive innovation and underpin the adoption of new technology.

The main empirical findings are that:

• Standards make an annual contribution of GBP 2,5 billion to the UK economy;
• Thirteen percent of the growth in labour productivity is attributed to the role of standards;
• Standards are an enabler of innovation and facilitator of technological change;
• The economic return from investment in standards makes sound business sense at both a macro- and a micro-economic level.

The research identifies standards as contributing to business in three specific ways:

• Encouraging innovation: Standards stimulate innovation and provide support for businesses from concept to market. They have the power to shape the way sectors work by sharing knowledge and creating effective synergies that accelerate the speed to market for products and services.
• Foundation for growth: Standards increase profitability by improving business efficiency and reducing costs, increasing consumer confidence and providing a foundation for growth.
• Promoting market access: Standards provide better access to markets and facilitate trade. They promote competition in the market place by helping industries capture knowledge, share insight and, with it, reduce risk.

To view the full report visit: http://www.nssf.info/macro-research.

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ECONOMIC BENEFITS OF STANDARDIZATION. SUMMARY OF RESULTS. FINAL REPORT AND PRACTICAL EXAMPLES
Beuth Verlag, Berlin, Vienna, Zürich.
Executive Summary in English available at: www.din.de/sixcms_upload/media/2896/economic_benefits_standardization.pdf

Abstract
The DIN study is a comprehensive investigation into the economic benefits of standardization. The joint research project Economic benefits of standardization initiated by DIN was carried out simultaneously in Germany, Austria and Switzerland by two contractors: the Department of Market-Oriented Business Management and the Department of Political Economics and Economic Research at the Technical University (TU) Dresden and the Fraunhofer Institute for Systems and Innovation Research, Karlsruhe. Part A, "The effects of standardization: Results of the company survey and interviews with experts" was carried out by TU Dresden and Part B, "Standardization and technological change: the effects of standardization on the German economy and foreign trade" was researched by the Fraunhofer Institute. Owing to technical and organizational limitations, the study dealt only with selected aspects of the economic implications of standardization.

The analysis of the economic benefits of standardization takes into consideration the four main partners in standardization: businesses, private households, the State and the standards body. The latter acts as an intermediary between the other three, which in turn are affected by standardization in different ways. The reactions of these actors to standardization and their motivation to become involved in standardization work are the main focus of the research conducted by TU Dresden. In contrast, the Fraunhofer Institute adopted a macro-economic approach, concentrating on the link between standardization and technological change, and the relationships between standardization, economic growth and exports. The hypothetical framework was tested via a company survey carried out in Germany, Austria and Switzerland. In addition, interviews were held with German and Austrian experts who represent the interests of private households and the State.

As expected, the study shows that company standards have the greatest positive effect on businesses, for they help improve processes. When it comes to businesses' relationship with suppliers and customers, however, industry-wide standards are the main instruments used to lower transaction costs and uphold market power over suppliers and customers. In fact, industry-wide standards play a vital role in our increasingly globalized world. 84 percent of the companies surveyed use European and International Standards as part of their export strategy in order to conform to foreign standards. From a macroeconomic perspective, significant findings are that:

• standards make a greater contribution to economic growth than patents or licences;
• export-oriented sectors of industry make use of standards as a strategy in opening up new markets;
• standards facilitate technological change.

The Economic Value of Standards, a presentation by Prof. Dr. Ulrich Blum at the NSS Conference, held on 16 November 2004 in Stockholm, provides an insightful graphical analysis based on the data from the DIN study. It is available at: http://www.scc.ca/Asset/iu_files/1.3_Blum_NSSConference.pdf

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THE ECONOMICS OF STANDARDS; THEORY, EVIDENCE, POLICY
Edward Elgar Publishing, Cheltenham UK, Northampton MA USA, ISBN: 1843767937.

Abstract
This book provides a comprehensive overview of the important topic of standards, which remains a vastly underresearched field of empirical inquiry. It presents a variety of interesting empirical analyses which reveal the driving forces and the economic impacts of standardization in both the manufacturing and the service sectors.

The author begins by providing a detailed outline of the various types of standards and their possible economic impacts. Before providing empirical validation of the theoretical arguments, he discusses the influence of standards within the regulatory system. Among the other actors in the standardization process, the author focuses in particular on the role of the firm, which acts as the main impetus for the development and implementation of new standards. He also examines the fundamental link between technical change and standardization, to assess whether this relationship is a virtuous or vicious cycle. In this context, the impact of intellectual property rights within standardization is also highlighted. Other significant aspects are the consequences of standards for trade and their role in fostering or inhibiting international trade flows. Finally, the author investigates the effect on macroeconomic growth where, especially in the new economy, formal standards are a crucial source of codified and publicly available knowledge.The analysis is based on extensive microeconomic, sectoral and macroeconomic data, which allows the author to compare the various economic impacts of standards and derive important policy conclusions.

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STANDARDS AND SUSTAINABLE TRADE: A SECTORAL ANALYSIS FOR THE PROPOSED SUSTAINABLE TRADE AND INNOVATION CENTRE (STIC)
IIED, London
Available at:
http://www.epe.be/stf/documents/standardsstudyfinal.pdf

Abstract
This study was conducted as part of a wider feasibility study for the ‘Sustainable Trade and Innovation Centre’ (STIC). It analyses the contribution of standards to sustainable development in terms of sustainability and market access, using case studies from food, forestry and tourism as examples. It focuses on voluntary environmental and social process standards, certification systems and codes, but does not discuss SPS standards.

The authors seek to reach beyond the rhetoric of sustainable trade – a developmental ‘win-win-win’ situation: providing trade opportunities which can simultaneously alleviate poverty and protect the environment – to explore the reality of standards for environmental and socially preferred products as tools to operationalise sustainable development.

The study finds that standards and associated codes and certification are proven means for seeking complementarities between trade and sustainable development; that private standards and certification initiatives are proven tools of private sector policy for sustainability; and that the standards-developing processes themselves also provide excellent opportunities for hearing different perspectives and thus facilitating organizational learning.

Several standardization issues of concern for developing countries’ exporters and providers of services are identified and discussed. To help overcome these issues, the study calls for the development of nonexclusionary standards, and for the participation of all stakeholders in the growing number of multi-stakeholder or partnership initiatives.

The report concludes with a set of recommendations for the establishment of a Sustainable Trade and Innovation Centre.

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THE BENEFITS OF STANDARDS: TRADING WITH AND WITHIN EUROPE
European Committee for Standardization ( CEN), Brussels
Further information available at:
http://www.cen.eu/CENORM/aboutus/benefits/index.asp

Abstract
Two economists look at standards, from a broad historical perspective, as a “public good” and also as an instrument of marketing policy in the life cycle of products. They examine issues behind the provision of standards by the market only and/or by intervention of public authorities. They analyze the relationship between the product life cycle and the development of standards. The authors conclude that standards are beneficial to the overall structure of industrialized economies and explain how diverse stakeholders, i.e. industry, governments and citizens/consumers, implicitly rely on and gain from standards.

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THE ECONOMICS OF STANDARDIZATION
Final report for standards and technical regulations directorate;
Department of trade and industry, London
Available at:
http://www.dti.gov.uk/files/file11312.pdf

Abstract
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.

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THE AIMS AND PRINCIPLES OF STANDARDIZATION
Edited by T.R.B. Sanders, Geneva: ISO.

Abstract
In this early publication by ISO, the objectives of standardization are explained as well as the organizational structures of standardization at the international, national and company level. Examples are given for various technical fields to demonstrate the effect standards and harmonized measurement units can have in terms of variety reduction, simplification and economic benefits for producers as well as for consumers. Standards are described as a tool for management, in particular in the fields of design, production, purchasing, marketing and export, administration and the control of quality.

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SELECTED IMPACTS OF DOCUMENTARY STANDARDS SUPPORTED BY NIST
Standards Coordination and Conformity Group, Standards Services Division, Technology Services, NIST, US Department of Comerce, USA.
Available at
http://ts.nist.gov/Standards/upload/NISTIR7398_final.pdf

Abstract
During 2006 the Operating Units (OUs) of the National Institute of Standards and Technology (NIST) were canvassed for instances where NIST has played an active role in the development or implementation of documentary standards that: (1) have been broadly adopted, or (2) have produced or are expected to produce significant economic or societal benefits. This study reports on the results of this survey.
This is part of a broader NIST Technology Services (TS) effort to assess the impact of standards on globalcompetitiveness and innovation.

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STANDARDS FOR BUSINESS - HOW COMPANIES BENEFIT FROM PARTICIPATION IN INTERNATIONAL STANDARDS SETTING
RSM Erasmus University, The Netherlands.
Published in International Standardization as a Strategic Tool: Commended Papers from the IEC Centenary Challenge 2006, IEC, Geneva, Switzerland, ISBN: 2-8318-8867-0.
Available at:
http://www.iecchallenge.org/papers/pdf_iecchallenge/vries.pdf

Abstract
The International Electrotechnical Commission (IEC) celebrated its anniversary in 2006. Since 1906, it has published thousands of standards that have shaped the world of electronics, electrotechnology and information technology. These standards are developed in hundreds of committees and working groups in which experts from all over the world participate. Famous scientists like Lord Kelvin have contributed to the development of IEC standards, but most participants in standards setting are experts from industry. Companies decide to invest in standardization and, apparently, expect returns on this investment. In this paper we present four cases in which companies indeed reaped substantial benefits from this investment, in terms of market share or cost savings. However, success for one company can mean losses for its competitor. Getting returns is not self-evident and therefore we also present findings which may support companies to decide whether or not to invest in standardization. A website has been developed to provide additional information.

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ARCHITECTURE-BASED APPROACHES TO INTERNATIONAL STANDARDIZATION AND EVOLUTION OF BUSINESS MODELS
The University of Tokyo - Manufacturing Management Research Center, Japan, published in International Standardization as a Strategic Tool: Commended Papers from the IEC Centenary Challenge 2006, IEC, Geneva, Switzerland, ISBN: 2-8318-8867-0.
Available at:
http://www.iecchallenge.org/papers/pdf_iecchallenge/shintaku.pdf

Abstract
Standardization has a great impact on economic growth—it accelerates technology transfer and cost reduction. As technology progresses rapidly, the price of a product also quickly falls. Consequently, the efficiency of society as a whole is improved and the benefit to consumers is increased. This chain—standardization, technological progress, price fall, and expansion of consumer benefit—causes growth in global economy. Especially after the 1990s, international standardization had a strong impact on the global economy and accelerated collaboration with advanced countries and newly industrialized economies (NIEs). The background to this lies in the rapid development during the 1990s of semiconductors and digital technology. These technologies drove the modularization of product architecture forward. Modularization made it easy for countries with little technological knowledge to enter new industries such as DVD and mobile phone. It can be said that the economic growth of developing countries changed greatly because of product modularization and standardization. The major companies that play a prominent role in developing core technologies and setting international standards have, however, also sought to maximize their profits. These companies ingeniously encapsulate their knowledge and intellectual property (IP) into a framework of technological standards. Their persistence to protect their IP apparently contradicts the goals of public standards organizations. The organizations promoting international standards, such as the International Electrotechnical Commission (IEC) and government institutions in each country, are more concerned with social welfare and especially consumer benefit. This paper provides a general framework for analyzing the economic impact of international standardization. Based on an analytical framework of product architecture, we seek an economic model that can harmonize the benefit of various entities such as the leading firms in advanced countries, the firms catching up technologically in NIEs, consumers in the global market, and public standards organizations.

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INTERNATIONAL COMPETITION AND GLOBAL STANDARDS: BUSINESS MODEL FOR STANDARDIZATION AS SEEN IN CASE STUDIES
Compiled by the Study Group on Economic and Social Effects of Standardization, the Ministry of Economy, Trade and Industry, Japan.
Summary in English available online, full Japanese version available through JISC.
Available at: http://www.jisc.go.jp/eng/topics/pdf/International%20Competition%20and%20Global%20Standards(summary)%20.pdf

Abstract
For business enterprises, the primary objectives for taking advantage of standardization include “market creation and expansion” and “cost reduction and improvement of production efficiency.” However, due to the nature of standardization as public goods, each player is equally able to capitalize on the standardized technology and enjoy its merits. In other words, while standardization expands profit-making opportunities for businesses, it does not necessarily promise a competitive advantage or ensure profits for individual companies. For businesses to eventually earn profits through standardization, the key lies in integrating standardization with corporate strategy or business strategy in accordance with the respective conditions for profit-making, while taking into account the nature and impact of standrdization.

A number of case studies are presented to highlight the role of standardization for coroporate and product strategy.

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