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The Roles of Standardization, Certification and Assurance Services in Global Commerce

51 Pages Posted: 4 May 2008  

Margaret M. Blair

Vanderbilt University - Law School

Cynthia A. Williams

York University - Osgoode Hall Law School

Li-Wen Lin

University of British Columbia (UBC), Faculty of Law

Multiple version iconThere are 2 versions of this paper

Date Written: May 2008

Abstract

In this article we examine the rapid emergence and expansion of standardized product and process frameworks and a private-sector compliance and enforcement infrastructure that we believe may increasingly be providing a substitute for public and legal regulatory infrastructure in global commerce. This infrastructure is provided by a proliferation of performance codes and standards, many of which define acceptable social and environmental behavior, and a rapidly-growing number of privately-trained and authorized inspectors and certifiers that we call the third-party assurance industry. We offer reasons for this development, evidence of its scope and scale, and then describe the phenomenon in more detail by examining supply chain arrangements in two industries, food products and apparel, where the use of third-party standards and assurance services has expanded especially rapidly. We conclude with a discussion of the implications for the "make or buy" decision at the core of the theory of the firm. We argue that as quasi-regulatory standards are developed within various industries, and as performance to these standards can be systematically evaluated using third-party inspectors and certifiers, the costs of moving production outside of vertical firm hierarchies drop. We believe this may be an important factor in accelerating the shift to outsourcing that has been observed over the last two decades.

Keywords: standardization, compliance, enforcement infrastructure, assurance, quasi-regulatory standards, global commerce, third-party inspectors

JEL Classification: K20, K22, K32

Suggested Citation

Blair, Margaret M. and Williams, Cynthia A. and Lin, Li-Wen, The Roles of Standardization, Certification and Assurance Services in Global Commerce (May 2008). CLPE Research Paper No. 12/2008; Vanderbilt Law and Economics Research Paper No. 08-16. Available at SSRN: https://ssrn.com/abstract=1128143 or http://dx.doi.org/10.2139/ssrn.1128143

Margaret M. Blair (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States
615-322-6087 (Phone)

Cynthia A. Williams

York University - Osgoode Hall Law School ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
416-736-5545 (Phone)

Li-Wen Lin

University of British Columbia (UBC), Faculty of Law ( email )

1822 East Mall
Vancouver, British Columbia V6T 1Z1
Canada

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