Effects of Standards Implementation

• Beginner 1, Course 7

The global economy, integration, and internationalization of local markets have led to the strategic and economic potential of standardisation becoming tremendously significant. Many aspects of standardisation no longer take place at the national level but are becoming mostly regional and international. Due to technological supremacy, the standardisation arena is becoming the dominant area of most developed
countries, global consortia, and companies. As shown by several examples of some Asian countries, standardisation can also contribute significantly to developing countries catching up with developed countries.

After completing this module, you should be able to:

1. Understand that standardisation must be evaluated from an economic point of view;
2. Explain the network effects and the fact that the more users use only one standard, the higher the probability that other users will choose the same standard, as well;
3. Explain that direct network effects arise when users are being linked to a large number of different agents (e.g. telephone/e-mail networks);
4. Explain that indirect network effects arise when users must join two or more components that are linked to different networks to achieve the network benefits;
5. Explain that if several manufacturers offer the same or similar products at the market, it does not necessarily mean that the one with more advanced solutions will win but the one more successful in developing a larger network of users and even the one that may eventually lead the establishment of a common sectoral standard;
6. Explain the way in which the situation explained by the information asymmetry and Gresham’s Law might be solved by the minimum quality/safety standards; and
7. Explain the way in which the information/measurement standards may significantly reduce transactional costs between buyers and sellers.

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