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Decentralizing decision making in modularization strategies: Overcoming barriers from dysfunctional accounting systems

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  • Israelsen, Poul
  • Jørgensen, Brian

Abstract

Research on product modularity is dominated by an operations management (OM) perspective, through which numerous models to predict optimal modularization strategies have been developed. However, we argue that implementation of these predictions is hampered by prevailing project accounting systems which distorts the economic effects of modularization at the level of the individual product. This has the implication that decisions on modularization can only be made by top management if decision authority and relevant information are to be aligned. To overcome this problem, we suggest a solution that aligns the descriptions of the economic consequences of modularization at the project and portfolio level which makes it possible to decentralize decision making while making sure that local goals are congruent with the global ones in order to avoid suboptimal behaviour.

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  • Israelsen, Poul & Jørgensen, Brian, 2011. "Decentralizing decision making in modularization strategies: Overcoming barriers from dysfunctional accounting systems," International Journal of Production Economics, Elsevier, vol. 131(2), pages 453-462, June.
    • Handle: RePEc:eee:proeco:v:131:y:2011:i:2:p:453-462
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    3. Stadtherr, Frank & Wouters, Marc, 2021. "Extending target costing to include targets for R&D costs and production investments for a modular product portfolio—A case study," International Journal of Production Economics, Elsevier, vol. 231(C).

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