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Design complexity, vertical disintegration and knowledge organization in the semiconductor industry

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  • Ludovic Dibiaggio

Abstract

This article examines the advantages and drawbacks of internal knowledge integration versus collaborative outsourcing as two polar modes of governance in the design of application-specific integrated circuits (ASICs). Increasing technological complexity, miniaturization and the generalization of markets for technology have induced higher integration constraints for designers. The pace of innovation and frequent changes in design rules require a tightly controlled design process. As a consequence, knowledge integrators must develop expertise beyond the scope of their domain of activity if they are to ascertain the overall efficiency of systems. We find that although internalization of knowledge integration reduces coordination and agency-related costs, the involvement of partner firms in upstream design phases facilitates knowledge sharing and improves the coordination of innovation in modules. The analysis of the evolution of the ASICs industry shows that while large system integrators remain the dominant players, specialist firms are gaining market shares and do not hesitate to embark on the design of leading-edge systems. This result may simply reveal the increasing value of component knowledge in a disaggregated value chain. However, relying on a comparative case study of two similar development processes (one with each of the knowledge integration approaches) we confirm the strength of decentralized modes of governance on the condition that partner firms engage in a long-term relationship. Copyright 2007 , Oxford University Press.

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  • Ludovic Dibiaggio, 2007. "Design complexity, vertical disintegration and knowledge organization in the semiconductor industry," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 16(2), pages 239-267, April.
    • Handle: RePEc:oup:indcch:v:16:y:2007:i:2:p:239-267
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    1. Diego Damásio Lima & Daniel Pacheco Lacerda & Miguel Afonso Sellitto, 2017. "Systemic Analysis of the Brazilian Production Chain of Semiconductors: Graphic Representation and Leverage Points," Systemic Practice and Action Research, Springer, vol. 30(3), pages 295-316, June.
    2. T. Gries & R. Grundmann & I. Palnau & M. Redlin, 2017. "Innovations, growth and participation in advanced economies - a review of major concepts and findings," International Economics and Economic Policy, Springer, vol. 14(2), pages 293-351, April.
    3. Namchul Shin & Kenneth L. Kraemer & Jason Dedrick, 2017. "R&D and firm performance in the semiconductor industry," Industry and Innovation, Taylor & Francis Journals, vol. 24(3), pages 280-297, April.
    4. Qiao Guangshun & Lu Yulin, 2024. "Operating Efficiency in the Capital-Intensive Semiconductor Industry: A Nonparametric Frontier Approach," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 18(1), pages 1-17, January.
    5. Stephan Manning & Silvia Massini & Carine Peeters & Arie Y. Lewin, 2018. "The changing rationale for governance choices: Early vs. late adopters of global services sourcing," Strategic Management Journal, Wiley Blackwell, vol. 39(8), pages 2303-2334, August.
    6. Chila, Vilma & Devarakonda, Shivaram, 2024. "The effects of firm-specific incentives (stock options) on mobility and employee entrepreneurship," Journal of Business Venturing, Elsevier, vol. 39(3).
    7. repec:bla:jomstd:v:47:y:2010:i:s2:p:1510-1533 is not listed on IDEAS
    8. Pellens, Maikel & Della Malva, Antonio, 2016. "Changing of the guard: Structural change and corporate science in the semiconductor industry," ZEW Discussion Papers 16-050, ZEW - Leibniz Centre for European Economic Research.
    9. Stephan Manning & Silvia Massini & Carine Peeters & Arie Lewin, 2012. "Global Co-Evolution of Firm Boundaries: Process Commoditization, Capabilities Development, and Path Dependencies," Working Papers CEB 12-009, ULB -- Universite Libre de Bruxelles.
    10. Michael G. Jacobides & Sidney G. Winter, 2012. "Capabilities: Structure, Agency, and Evolution," Organization Science, INFORMS, vol. 23(5), pages 1365-1381, October.
    11. Wang, Chi-Tai & Chiu, Chui-Sheng, 2014. "Competitive strategies for Taiwan's semiconductor industry in a new world economy," Technology in Society, Elsevier, vol. 36(C), pages 60-73.
    12. Malik, Ashish & Froese, Fabian Jintae & Sharma, Piyush, 2020. "Role of HRM in knowledge integration: Towards a conceptual framework," Journal of Business Research, Elsevier, vol. 109(C), pages 524-535.
    13. Gries, T. & Grundmann, R. & Palnau, I. & Redlin, M., 2015. "Does technological change drive inclusive industrialization? : A review of major concepts and findings," MERIT Working Papers 2015-044, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    14. Guangshun Qiao & Zhan-ao Wang, 2021. "Vertical integration vs. specialization: a nonparametric conditional efficiency estimate for the global semiconductor industry," Journal of Productivity Analysis, Springer, vol. 56(2), pages 139-150, December.
    15. Albert Jolink & Eva Niesten, 2012. "Hybrid Governance," Chapters, in: Michael Dietrich & Jackie Krafft (ed.), Handbook on the Economics and Theory of the Firm, chapter 12, Edward Elgar Publishing.
    16. Cheng, Liang-Chieh (Victor), 2011. "Assessing performance of utilizing organizational modularity to manage supply chains: Evidence in the US manufacturing sector," International Journal of Production Economics, Elsevier, vol. 131(2), pages 736-746, June.
    17. Jolink, Albert & Niesten, Eva, 2012. "Recent qualitative advances on hybrid organizations: Taking stock, looking ahead," Scandinavian Journal of Management, Elsevier, vol. 28(2), pages 149-161.
    18. Guangshun Qiao, 2021. "Does the asset-light business model create value? A panel data stochastic frontier approach for the global semiconductor industry," Economics Bulletin, AccessEcon, vol. 41(3), pages 1125-1138.
    19. Gilsing, Victor & Vanhaverbeke, Wim & Pieters, Michiel, 2014. "Mind the gap," Technological Forecasting and Social Change, Elsevier, vol. 81(C), pages 351-362.
    20. Chollet, Barthélemy & Revet, Karine, 2023. "Digging deep or scratching the surface? Contingent innovation outcomes of seeking advice from geographically distant ties," Technological Forecasting and Social Change, Elsevier, vol. 189(C).
    21. Bilgehan Uzunca & Bruno Cassiman, 2023. "Entry diversion: Deterrence by diverting submarket entry," Strategic Management Journal, Wiley Blackwell, vol. 44(1), pages 11-47, January.

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