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Do Modular Products Lead to Modular Organizations?

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  • Hoetker, Glenn

    (U of Illinois at Urbana-Champaign)

Abstract

The tacit assumption that increased product modularity is associated with advantageous increases in organizational modularity underlies much of the literature on modularity. Previous empirical investigations of this assumption, few in number, have faced numerous confounding factors and generated conflicting results. I build a causal model for the relationship between product and organizational modularity, which I test using a distinctive empirical setting that controls for confounding factors present in previous studies. I find support for only part of the assumed relationship, showing that modularity is a more multi-faceted concept than previously recognized. In particular, increased product modularity enhances reconfigurability of organizations more quickly than it allows firms to move activities out of hierarchy. The paper contributes to the emerging stream of research that focuses on the previously under-appreciated costs of designing and maintaining a modular organization.

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File URL: http://www.business.illinois.edu/Working_Papers/papers/02-0130.pdf
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Bibliographic Info

Paper provided by University of Illinois at Urbana-Champaign, College of Business in its series Working Papers with number 02-0130.

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Date of creation: 2002
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Handle: RePEc:ecl:illbus:02-0130

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Web page: http://www.business.uiuc.edu/Working_Papers/Main.asp
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References

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  1. Kenneth E. Train, 1998. "Recreation Demand Models with Taste Differences over People," Land Economics, University of Wisconsin Press, vol. 74(2), pages 230-239.
  2. Langlois, Richard N. & Robertson, Paul L., 1992. "Networks and innovation in a modular system: Lessons from the microcomputer and stereo component industries," Research Policy, Elsevier, vol. 21(4), pages 297-313, August.
  3. Teece, David J. & Rumelt, Richard & Dosi, Giovanni & Winter, Sidney, 1994. "Understanding corporate coherence : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 23(1), pages 1-30, January.
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  7. Masten, Scott E, 1984. "The Organization of Production: Evidence from the Aerospace Industry," Journal of Law and Economics, University of Chicago Press, vol. 27(2), pages 403-17, October.
  8. Pisano, Gary P, 1989. "Using Equity Participation to Support Exchange: Evidence from the Biotechnology Industry," Journal of Law, Economics and Organization, Oxford University Press, vol. 5(1), pages 109-26, Spring.
  9. Klein, Benjamin, 1980. "Transaction Cost Determinants of "Unfair" Contractual Arrangements," American Economic Review, American Economic Association, vol. 70(2), pages 356-62, May.
  10. Brusoni, Stefano & Prencipe, Andrea, 2001. "Unpacking the Black Box of Modularity: Technologies, Products and Organizations," Industrial and Corporate Change, Oxford University Press, vol. 10(1), pages 179-205, March.
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Cited by:
  1. Moeen, Mahka & Somaya, Deepak & Mahoney, Joseph T., 2011. "Supply Portfolio Concentration in Outsourced Knowledge-Based Services," Working Papers 11-0106, University of Illinois at Urbana-Champaign, College of Business.
  2. Andreas Reinstaller, 2011. "The Modularity of Technology and Organisations. Implications for the Theory of the Firm," WIFO Working Papers 398, WIFO.
  3. Vermeulen, Ben & De Kok, Ton, 2013. "A value network development model and implications for innovation and production network management," MPRA Paper 51393, University Library of Munich, Germany.
  4. 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.
  5. Richard Gentry & Heather Elms, 2009. "Firm Partial Modularity and Performance in the Electronic Manufacturing Services Industry," Industry and Innovation, Taylor & Francis Journals, vol. 16(6), pages 575-592.
  6. Aric Rindfleisch & Kersi Antia & Janet Bercovitz & James Brown & Joseph Cannon & Stephen Carson & Mrinal Ghosh & Susan Helper & Diana Robertson & Kenneth Wathne, 2010. "Transaction costs, opportunism, and governance: Contextual considerations and future research opportunities," Marketing Letters, Springer, vol. 21(3), pages 211-222, September.

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