Function of Standardisation. Standardisation contributes to efficient interaction between parties by agreeing complying with arrangements constituting the standard. Standardisation therefore grounds on common sense. The more agreeing the higher the likelihood for high adoption of a standard the more it merits to be called a standard. Standardisation thus could serve as a trigger for technological change. As standards are a willful limitation of options, they allow new standard-based technological products an easier market entry due to their interoperability with other complying products and features. In comparison, non-standardised products would usually face higher costs or limiting field of application. However, as innovation relies on variety it is important that standardisation takes place with the right timing and intense to support and not to prevent innovation. Besides allowing and encouraging innovation, standardisation leads to (Source: The Economic Benefits of Standards to New Zealand Standards Council of New Zealand and BRANZ August 2011, p. 8ff.) preventing information asymmetry (as access to standards provides transparency), creating economies of scale (as the number of standard complying products increase which can lower the costs associated with the production of one unit), allowing for network externalities (as it may be a reason for joining a network if already many others are part of that network) and reduction of transaction costs (e.g. for searching or understanding what would be the right product for the demands). In a nutshell, the function of standardisation contributes preventing market failures.
