Self-Regulation in the Cradle : The Role of Standards in Emerging Industries

There is a long history of self-regulation—governance of firm behavior by private entities—both in the United States and globally, and there is an equally long discussion of self-regulation within the literature. But there has been less attention to the role of self-regulation in spurring and enabling innovation and growth within emerging industries. Through a detailed case study of the small hydrogen economy—which is projected to balloon in coming years— and additional examples from a range of once-nascent industries such as the Internet and hydraulic fracturing for fossil fuels, we examine the attributes of self-regulation that seem to support innovation and scaling up of operations, particularly in highly networked industries, while acknowledging the limitations of this approach. Self-regulation can provide an important balance of certainty and flexibility, fill substantive and jurisdictional gaps as industries emerge, provide healthy competition among standards to produce effective and efficient standards, and produce standards within multiple components of an industry simultaneously, which is critical for networked industries. But as with public governance, self-regulation, too, can leave substantive gaps—which governments with a birds-eye view can fill and are filling in the emerging hydrogen industry. And self-regulation poses risks of capture and anti-competitive behavior, thus calling for a public governance complement