Editing Standardization (section)

==Effects==
Standardization has a variety of benefits and drawbacks for firms and consumers participating in the market, and on technology and innovation.

===Effect on firms===
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.<ref>{{cite book|last=Shapiro|first=Carl|title=Information Rules: A Strategic Guide to the Network Economy|url=https://archive.org/details/informationrules00shap_752|url-access=limited|date=1999|publisher=Harvard Business School Press|location=Boston, Mass|pages=[https://archive.org/details/informationrules00shap_752/page/n239 232]–233|author2=Hal R. Varian |isbn=9780875848631 }}</ref> 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.<ref>{{cite book|last=Christensen|first=Clayton M.|title=The Innovator's Solution: Creating and Sustaining Successful Growth|url=https://archive.org/details/innovatorssoluti00chri|url-access=registration|date=2003|publisher=Harvard Business School Press|location=Boston, Mass|page=[https://archive.org/details/innovatorssoluti00chri/page/140 140]|author2=Michael E. Raynor |isbn=9781578518524 }}</ref>

===Effect on consumers===
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.<ref>{{cite book|last=Shapiro|first=Carl|title=Information Rules: A Strategic Guide to the Network Economy|url=https://archive.org/details/informationrules00shap_752|url-access=limited|date=1999|publisher=Harvard Business School Press|location=Boston, Mass|page=[https://archive.org/details/informationrules00shap_752/page/n236 229]|author2=Hal R. Varian |isbn=9780875848631 }}</ref> 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.<ref>{{cite book|last=Shapiro|first=Carl|title=Information Rules: A Strategic Guide to the Network Economy|url=https://archive.org/details/informationrules00shap_752|url-access=limited|date=1999|publisher=Harvard Business School Press|location=Boston, Mass|page=[https://archive.org/details/informationrules00shap_752/page/n237 230]|author2=Hal R. Varian |isbn=9780875848631 }}</ref> Consumers may also get the benefit of being able to mix and match components of a system to align with their specific preferences.<ref name="Shapiro 1999 233">{{cite book|last=Shapiro|first=Carl|title=Information Rules: A Strategic Guide to the Network Economy|url=https://archive.org/details/informationrules00shap_752|url-access=limited|date=1999|publisher=Harvard Business School Press|location=Boston, Mass|page=[https://archive.org/details/informationrules00shap_752/page/n240 233]|author2=Hal R. Varian |isbn=9780875848631 }}</ref> 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.<ref>J. Gregory Sidak, ''The Value of a Standard Versus the Value of Standardization'', 68 BAYLOR L. REV. at 3 (Forthcoming 2016), https://www.criterioneconomics.com/the-value-of-a-standard-versus-the-value-of-standardization.html {{Webarchive|url=https://web.archive.org/web/20161010215246/https://www.criterioneconomics.com/the-value-of-a-standard-versus-the-value-of-standardization.html |date=2016-10-10 }}.</ref>

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.<ref name="Shapiro 1999 233"/> 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.<ref name="Shapiro 1999 233"/> It is also possible that a consumer will choose a product based upon a standard that fails to become dominant.<ref>Cowan, Robin. "High Technology and the Economics of Standardization." Paper presented at the International Conference on Social and Institutional Factors Shaping Technological Development: Technology at the Outset, Berlin, Germany, May 27–28, 1991. p. 20.</ref> 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.

===Effect on technology===
Much like the effect on consumers, the effect of standardization on technology and innovation is mixed.<ref>{{cite web|last=Blind|first= K. |year=2013|title= The impact of standardisation and standards on innovation |id =NESTA Working Paper 13/15|website= NESTA |url = https://www.nesta.org.uk/sites/default/files/the_impact_of_standardization_and_standards_on_innovation.pdf|url-status = dead|archive-url = https://web.archive.org/web/20170829215500/https://www.nesta.org.uk/sites/default/files/the_impact_of_standardization_and_standards_on_innovation.pdf |archive-date = 29 August 2017}}</ref> Meanwhile, the various links between research and standardization have been identified,<ref>{{cite journal |last1=Blind |first1=K. |last2=Gauch |first2=S. | year=2009 |title=Research and standardisation in nanotechnology: evidence from Germany|journal=The Journal of Technology Transfer|issue=3|volume= 34|pages=320–342|doi=10.1007/s10961-008-9089-8|s2cid=154210261 }}</ref> also as a platform of knowledge transfer<ref>{{cite journal |last1=Blind |first1=K. |last2=Mangelsdorf|first2=A.|year=2016|title=Motives to standardize: Empirical evidence from Germany|journal=Technovation|volume=48–49|pages=13–24|doi=10.1016/j.technovation.2016.01.001|doi-access=free}}</ref> and translated into policy measures (e.g. [http://www.bmwi.de/DE/service,did=746982.html WIPANO]).

Increased adoption of a new technology as a result of standardization is important because rival and incompatible approaches competing in the marketplace can slow or even kill the growth of the technology (a state known as [[market fragmentation]]).<ref>{{cite book|last=Shapiro|first=Carl|title=Information Rules: A Strategic Guide to the Network Economy|url=https://archive.org/details/informationrules00shap_752|url-access=limited|date=1999|publisher=Harvard Business School Press|location=Boston, Mass|page=[https://archive.org/details/informationrules00shap_752/page/n270 264]|author2=Hal R. Varian |isbn=9780875848631 }}</ref> The shift to a modularized architecture as a result of standardization brings increased flexibility, rapid introduction of new products, and the ability to more closely meet individual customer's needs.<ref>{{cite book|last=Christensen|first=Clayton M.|title=The Innovator's Solution: Creating and Sustaining Successful Growth|url=https://archive.org/details/innovatorssoluti00chri|url-access=registration|date=2003|publisher=Harvard Business School Press|location=Boston, Mass|pages=[https://archive.org/details/innovatorssoluti00chri/page/131 131–132]|author2=Michael E. Raynor |isbn=9781578518524 }}</ref>

The negative effects of standardization on technology have to do with its tendency to restrict new technology and innovation. Standards shift competition from features to price because the features are defined by the standard. The degree to which this is true depends on the specificity of the standard.<ref>{{cite book|last=Shapiro|first=Carl|title=Information Rules: A Strategic Guide to the Network Economy|url=https://archive.org/details/informationrules00shap_752|url-access=limited|date=1999|publisher=Harvard Business School Press|location=Boston, Mass|page=[https://archive.org/details/informationrules00shap_752/page/n238 231]|author2=Hal R. Varian |isbn=9780875848631 }}</ref> Standardization in an area also rules out alternative technologies as options while encouraging others.<ref>Cowan, Robin. "High Technology and the Economics of Standardization." Paper presented at the International Conference on Social and Institutional Factors Shaping Technological Development: Technology at the Outset, Berlin, Germany, May 27–28, 1991. p. 12</ref>