Tim Büthe
The Politics of Setting Standards: Institutional Complementarity Theory
This research project seeks to provide insights into the creation of rules for global markets by transnational expert organizations.  I provide an analytical framework for understanding the fundamentally political and often conflictual nature of such rule-making.  It illuminates how differences in domestic institutions are a key determinant of who wins and who loses when there are conflicts of interest in these organizations.  Specifically, I argue that the characteristics of domestic institutions that lead to success depend upon the structure and decisionmaking procedures of the institutions at the international level.  These ideas have culminated in Institutional Complementarity Theory, which I have developed in joint work with Walter Mattli.
Institutional Complementarity Theory elucidates the outcomes of distributional and political conflicts in private institutional settings.  It explains who wins and who loses in private standard-setting organizations such as the International Organization for Standardization (ISO) and its electro-technical counterpart, the IEC, whose product standards affect market access and the value of intellectual property rights, or the International Accounting Standards Board (IASB), whose financial reporting standards determine financing options and business practices.  The economic and political stakes in setting these standards thus are high.
Power matters, centrally, to the ability of a country's private interests to achieve their objectives in such global governance.  My work shows, however, that the traditional power resources of states or governments play only a marginal role in this realm of global private politics.  Instead, power is largely a function of domestic institutions, which are the conduit for information and the aggregation of preferences.  These domestic institutions often differ due to country-specific historical legacies.  Domestic institutions that have the best "fit" with the international institutions empower their domestic stakeholders.
 
A number of publications have come out of this project.  We develop the core ideas of Institutional Complementarity Theory in "Setting International Standards" (World Politics 2003).  That article also puts the theoretical argument to an initial test through statistical analyses of original data about international product standard-setting in ISO and IEC, gathered from more than a thousand firms through a multi-country business survey.  The findings show that the complementarity of domestic and international standards institutions is indeed a crucial source of power and hence an important determinant of the relative gains of the integration of product markets through international standards.  "Standards for Global Markets" presents a non-technical version of this argument as well as key findings from the product standards survey.  It makes the analysis of standard-setting as a political process accessible to a broader audience by embedding it in a general discussion of standards as instruments of global governance, illustrated by specific empirical examples.
Three other chapters and articles focus on product standards.  In "The Power of Norms; the Norms of Power," I analyze the evolution of one of the major private standard-setters, the International Electrotechnical Commission (IEC), from its constitutive meeting in 1906 through today.  I also situate standard-setting in the context of what I call the "governance sequence."  In "Private and Public Politics in International Market Regulation," I show that the sequence matters: When implementation of a technical standard requires regulatory approval, the relative isolation of the non-governmental IEC and its technical committees from government regulators can be a major liability.  A compromise standard, adopted with broad support from the technical experts after many years of work, may thus end up getting implemented nowhere. I discuss general policy implications of my work on product standards, focused on the insights from Institutional Complementarity Theory in a policy report, "Product Standards in Transatlantic Trade and Investment" (jointly with Jan Martin Witte).
In more recent work, I have broadened my empirical focus to standard-setting organizations beyond the realm of product standards, especially the International Accounting Standards Board (IASB), which sets international standards for accounting or corporate financial reporting.  Financial reporting standards specify how and when profits and losses, assets and liabilities, and other conditions that affect a firm's financial health must be reported in the company's regulatory filings and published financial statements.  These standards been the focus of discussion at meetings of the OECD, G7 and G-20 governments, and have been controversially debated in all of the leading financial and business publications in recent years.  Not only is the international harmonization of financial reporting a timely topic, it also involves a private transnational standard-setting body that is in many respects very similar to the private rule-makers for product markets, ISO and IEC. At the domestic level, howevery, standards institutions vary across countries, and this variation is very different in the realm of financial markets from what we find in the realm of product markets, allowing us to get great analytical leverage out of the comparison across the two issue areas.
The research report "Assessing the IASB" summarizes with graphics and summary statistics some of the initial results of a multi-industry, multi-country business survey through which I have gathered original data from senior financial executives in hundreds of stock market-listed companies—data about their use of domestic and international financial standards, their stakes in international standard-setting, their assessment of the IASB standard-setting process, and their ability to influence that process through a variety of means (jointly with Walter Mattli).  Our forthcoming book, New Global Rulers: The Privatization of Regulation in the World Economy, then puts all of this research together in a comparative study of international private standards-setting for product and financial markets.  We develop here a typology of global regulation that keeps the distinction between market-based and non-market-based standards adoption separate from the distinction between public (governmental) and private (non-governmental) institutions for standard-setting—distictions that are often conflated in the literature.  This typology suggests, inter alia, scope conditions for the core applicability of Institutional Complementarity Theory.  We then present Institutional Complementarity Theory, fully fleshed out, and put it to systematic tests.  The empirical analyses of rule-making for global product and financial markets combine statistical analyses of the survey data with information from nearly a hundred interviews and analyses of internal documents of the standard-setting organizations (including many that are not in the public realm).  In "International Standards and Standard-Setting Bodies," an entry for the Oxford Handbook on Business and Government, we use our typology of global regulation to identify differences among standard-setters that have systematic implications for business-government relations.
Tim Büthe and Walter Mattli.  New Global Rulers: The Privatization of Regulation in the World Economy.  Princeton: Princeton University Press, 2011.
Walter Mattli and Tim Büthe.  "Setting International Standards: Technological Rationality or Primacy of Power?"  World Politics vol.56 no.1 (October 2003): 1-42.
Tim Büthe and Walter Mattli.  "Standards for Global Markets:  Domestic and International Institutions for Setting International Product Standards."  In Handbook on Multi-Level Governance, edited by Henrik Enderlein, Sonja Wälti, and Michael Zürn.  Cheltenham Glos (UK): Edward Elgar, 2010 (forthcoming).
Tim Büthe.  "The Power of Norms; the Norms of Power:  Who Governs International Electrical and Electronic Technology?"  In Who Governs the Globe?, edited by Deborah D. Avant, Martha Finnemore, and Susan K. Sell.  Cambridge University Press, 2010 (forthcoming).
In this chapter, I trace the evolution of one of the major private standard-setters, the International Electrotechnical Commission (IEC), from its constitutive meeting in London in 1906 through today.  I examine the seemingly ever increasing scope of the IEC's activities, from standardizing the measurement and terminology of electrical power in its early years to developing thousands of standard for a broad range of electrical and eletronic products in recent years. I also trace the evolution of the organization's membership over the past century, and discuss the causes and consequences of the IEC's non-governmental status.  I show that the professional norms of the scientists and engineers who staff most of the IEC's technical committees have a real effect in shaping how these stakeholders pursue their interests but otherwise hardly constrain the pursuit of those interests.  The economic stakes in setting standards are often substantial, and the distribution of the adjustment costs is vigorously contested.
Tim Büthe and Walter Mattli.  "International Standards and Standard-Setting Bodies."  In Oxford Handbook on Business and Government, edited by David Coen, Graham Wilson, and Wyn Grant.  Oxford/New York: Oxford University Press, 2009: 440-471.
Tim Büthe and Jan Martin Witte.  Product Standards in Transatlantic Trade and Investment:  Domestic and International Practices and Institutions.  American Institute for Contemporary German Studies (AICGS) Policy Report No.13.  Washington, D.C.: AICGS, May 2004.
Tim Büthe.  "Private and Public Politics in International Market Regulation."  Revise and Resubmit at Review of International Political Economy.
Tim Büthe and Walter Mattli.  Assessing the IASB: Results of a Business Survey.  Durham, NC—Oxford, UK: Duke University Center for International Studies and Oxford University Global Economic Governance Programme, November 2008.

 

 

 

 

 

 

 

 

 

 

 

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