The impact of standardization (public and industry) on product innovation, market access and foreign trade: with specific reference to South Africa

Abstract

Product innovation and its efficient diffusion are important to enhance factor productivity, market access, job creation and trade. Innovative firms remain competitive in an increasingly global environment. Product innovation add maximum economic value when the new knowledge and technical know-how are spread through the economy. Standardisation of products is regarded as a vital tool to enable the diffusion of product innovations. The economic rationale for standardisation is based on the theory market failure that requires some sort of correction. Standardisation is regarded as a public good, a form of technical infrastructure. It reduces transaction costs and information asymmetries; increased the willingness of consumers to pay, which in turn increases the success and diffusion of innovation. Lower transaction costs result in reduced production and distribution costs. For consumers it also results in reduced search and testing costs as well as reduced time and effort to evaluate quality. Studies on the impact of standardisation were done for some developed countries, but not for developing countries. Unlike most studies that have a narrow industry-focus, this report has a broader focus on the impact of various types of standards on product innovation, market access and trade. It presented specific case studies for various industries in South Africa as well as studies on the impact of standards internationally.