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The power of integrality: Linkages between product architecture, innovation, and industry structure

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  • Fixson, Sebastian K.
  • Park, Jin-Kyu
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    Abstract

    A substantial literature stream suggests that many products are becoming more modular over time, and that this development is often associated with a change in industry structure towards higher degrees of specialization. These developments can have strong implications for an industry's competition as the history of the PC industry illustrates. To add to our understanding of the linkages between product architecture, innovation, and industry structure we develop detailed product architecture measurements based on a previously proposed method [Fixson, S.K., 2005. Product architecture assessment: a tool to link product, process, and supply chain design decisions. Journal of Operations Management 23 (3/4), 345-369] and study an unusual case in which a firm - through decreasing its product modularity - turned its formerly competitive industry into a near-monopoly. Using this case study we explore how existing theories on modularity explain the observed phenomenon, and show that most consider technological change in rather long-term dimensions, and tend to focus on efficiency-related arguments to explain the resulting forces on competition. We add three critical aspects to the theory that connects technological change and industry dynamics. First, we suggest integrating as a new design operator to explain product architecture genesis. Second, we argue that a finer-grained analysis of the product architecture shows the existence of multiple linkages between product architecture and industry structure, and that these different linkages help explain the observed intra-industry heterogeneity across firms. Third, we propose that the firm boundary choice can also be a pre-condition of the origin of architectural innovation, not only an outcome of efficiency considerations.

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    Bibliographic Info

    Article provided by Elsevier in its journal Research Policy.

    Volume (Year): 37 (2008)
    Issue (Month): 8 (September)
    Pages: 1296-1316

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    Handle: RePEc:eee:respol:v:37:y:2008:i:8:p:1296-1316

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    Web page: http://www.elsevier.com/locate/respol

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    Cited by:
    1. Engwall, Mats & Freilich, Jonatan, 2014. "Architectural Lock-in of the Drug Development Process," INDEK Working Paper Series 2014/4, Department of Industrial Economics and Management, Royal Institute of Technology.
    2. Sanchez, Ron & Mahoney, Joseph T., 2012. "Modularity and Economic Organization: Concepts, Theory, Observations, and Predictions," Working Papers 12-0101, University of Illinois at Urbana-Champaign, College of Business.
    3. Gil, Nuno & Tether, Bruce S., 2011. "Project risk management and design flexibility: Analysing a case and conditions of complementarity," Research Policy, Elsevier, vol. 40(3), pages 415-428, April.
    4. Nepal, Bimal & Monplaisir, Leslie & Famuyiwa, Oluwafemi, 2012. "Matching product architecture with supply chain design," European Journal of Operational Research, Elsevier, vol. 216(2), pages 312-325.
    5. Cabigiosu, Anna & Zirpoli, Francesco & Camuffo, Arnaldo, 2013. "Modularity, interfaces definition and the integration of external sources of innovation in the automotive industry," Research Policy, Elsevier, vol. 42(3), pages 662-675.
    6. Andreas Reinstaller, 2011. "The Modularity of Technology and Organisations. Implications for the Theory of the Firm," WIFO Working Papers 398, WIFO.

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