Standards, Modularity, and Innovation: The Case of Medical Practice

Abstract

Most economic analyses of path creation and dependence are stories about how standards create network externalities - and thus potential "lock-in" - in technological systems like personal computers or high-definition television. This paper examines similar questions of path creation and dependence in the context of behavioral rather than technological standards. (Standards, we note, are at base a kind of social institution; and social institutions are recurrent patterns of behavior that help to coordinate human activity.) The papers focuses on the setting of standards for medical education and medical practice in the United States in the early twentieth century. Drawing on the economic theory of the professions articulated by Savage (1994), we argue that those standards proved "enabling" in that they created a decentralized network that was open to ideas from outside and was able to collaborate easily in the interdisciplinary fashion that proved crucial for the development of new devices and techniques.

JEL Classification: I1, L2, O3