The power of integrality: Linkages between product architecture, innovation, and industry structure
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.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fixson, Sebastian K., 2007. "Modularity and Commonality Research: Past Developments and Future Opportunities," Working papers 37145, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Hart, Oliver D. & Moore, John, 1990.
"Property Rights and the Nature of the Firm,"
3448675, Harvard University Department of Economics.
- Clayton M. Christensen & Matt Verlinden & George Westerman, 2002. "Disruption, disintegration and the dissipation of differentiability," Industrial and Corporate Change, Oxford University Press, vol. 11(5), pages 955-993, November.
- Jacobides, Michael G. & Knudsen, Thorbjorn & Augier, Mie, 2006. "Benefiting from innovation: Value creation, value appropriation and the role of industry architectures," Research Policy, Elsevier, vol. 35(8), pages 1200-1221, October.
- Ulrich, Karl, 1995. "The role of product architecture in the manufacturing firm," Research Policy, Elsevier, vol. 24(3), pages 419-440, May.
- Cooper, Robin & Slagmulder, Regine, 2004. "Interorganizational cost management and relational context," Accounting, Organizations and Society, Elsevier, vol. 29(1), pages 1-26, January.
- Richard N. Langlois, 2003.
"Chandler in a Larger Frame: Markets, Transaction Costs, and Organizational Form in History,"
2003-16R, University of Connecticut, Department of Economics, revised Jan 2004.
- Langlois, Richard N., 2004. "Chandler in a Larger Frame: Markets, Transaction Costs, and Organizational Form in History," Enterprise & Society, Cambridge University Press, vol. 5(03), pages 355-375, September.
- George J. Stigler, 1951. "The Division of Labor is Limited by the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 59, pages 185.
- Richard N. Langlois, 2002.
"Modularity in Technology and Organization,"
in: Entrepreneurship and the Firm, chapter 2
Edward Elgar Publishing.
- Dalziel, Margaret, 2007. "A systems-based approach to industry classification," Research Policy, Elsevier, vol. 36(10), pages 1559-1574, December.
- Richard N. Langlois, 2002.
"The Vanishing Hand: the Changing Dynamics of Industrial Capitalism,"
2002-21, University of Connecticut, Department of Economics.
- Richard N. Langlois, 2003. "The vanishing hand: the changing dynamics of industrial capitalism," Industrial and Corporate Change, Oxford University Press, vol. 12(2), pages 351-385, April.
- Richard N. Langlois, 2001. "The Vanishing Hand: the Changing Dynamics of Industrial Capitalism," Economic History 0110001, EconWPA.
- Murmann, Johann Peter & Frenken, Koen, 2006.
"Toward a systematic framework for research on dominant designs, technological innovations, and industrial change,"
Elsevier, vol. 35(7), pages 925-952, September.
- P. Murmann & K. Frenken, 2002. "Toward a Systematic Framework for Research on Dominant Designs, Technological Innovations, and Industrial Change," Papers on Economics and Evolution 2002-12, Philipps University Marburg, Department of Geography.
- Shibata, Tomoatsu & Yano, Masaharu & Kodama, Fumio, 2005. "Empirical analysis of evolution of product architecture: Fanuc numerical controllers from 1962 to 1997," Research Policy, Elsevier, vol. 34(1), pages 13-31, February.
- George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts and the Theory of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 39-84.
- Fixson, Sebastian K., 2007. "Modularity and Commonality Research: Past Developments and Future Opportunities," Working papers 37286, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Teece, David J., 1993.
"Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy,"
Elsevier, vol. 22(2), pages 112-113, April.
- Teece, David J., 1986. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," Research Policy, Elsevier, vol. 15(6), pages 285-305, December.
- Lafontaine, Francine & Slade, Margaret, 2007.
"Vertical Integration and Firm Boundaries : The Evidence,"
The Warwick Economics Research Paper Series (TWERPS)
799, University of Warwick, Department of Economics.
- Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
- Alan MacCormack & John Rusnak & Carliss Y. Baldwin, 2006. "Exploring the Structure of Complex Software Designs: An Empirical Study of Open Source and Proprietary Code," Management Science, INFORMS, vol. 52(7), pages 1015-1030, July.
- Gibbons, Robert, 2005. "Four forma(lizable) theories of the firm?," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 200-245, October.
- Carliss Y. Baldwin, 2008. "Where do transactions come from? Modularity, transactions, and the boundaries of firms," Industrial and Corporate Change, Oxford University Press, vol. 17(1), pages 155-195, February.
- Pimmler, Thomas U. (Thomas Udo) & Eppinger, Steven D., 1994. "Integration analysis of product decompositions," Working papers 3690-94., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Carliss Y. Baldwin & Kim B. Clark, 2000. "Design Rules, Volume 1: The Power of Modularity," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262024667, December.
When requesting a correction, please mention this item's handle: RePEc:eee:respol:v:37:y:2008:i:8:p:1296-1316. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.