<P> The primary effect of standardization on firms is that the basis of competition is shifted from integrated systems to individual components within the system . Prior to standardization a company's product must span the entire system because individual components from different competitors are incompatible, but after standardization each company can focus on providing an individual component of the system . When the shift toward competition based on individual components takes place, firms selling tightly integrated systems must quickly shift to a modular approach, supplying other companies with subsystems or components . </P> <P> Standardization has a variety of benefits for consumers, but one of the greatest benefits is enhanced network effects . Standards increase compatibility and interoperability between products, allowing information to be shared within a larger network and attracting more consumers to use the new technology, further enhancing network effects . Other benefits of standardization to consumers are reduced uncertainty, because consumers can be more certain that they are not choosing the wrong product, and reduced lock - in, because the standard makes it more likely that there will be competing products in the space . Consumers may also get the benefit of being able to mix and match components of a system to align with their specific preferences . Once these initial benefits of standardization are realized, further benefits that accrue to consumers as a result of using the standard are driven mostly by the quality of the technologies underlying that standard . </P> <P> Probably the greatest downside of standardization for consumers is lack of variety . There is no guarantee that the chosen standard will meet all consumers' needs or even that the standard is the best available option . Another downside is that if a standard is agreed upon before products are available in the market, then consumers are deprived of the penetration pricing that often results when rivals are competing to rapidly increase market share in an attempt to increase the likelihood that their product will become the standard . It is also possible that a consumer will choose a product based upon a standard that fails to become dominant . In this case, the consumer will have spent resources on a product that is ultimately less useful to him or her as the result of the standardization process . </P> <P> Much like the effect on consumers, the effect of standardization on technology and innovation is mixed . Meanwhile, the various links between research and standardization have been identified, also as a platform of knowledge transfer and translated into policy measures (e.g. WIPANO). </P>

One of the main advantages of standardization is that it reduces the potential variety of products