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Firm Partial Modularity and Performance in the Electronic Manufacturing Services Industry

  • Richard Gentry
  • Heather Elms
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    Firms continue to develop new ways to decentralize non-core activities to outside parties. Scholars have approached this issue with modularity theory, suggesting a continuum of arrangements ranging from hierarchy to market. Hierarchy relies on fiat, while partially modular forms, those forms between hierarchy and market, require greater coordination, communication and relationships between firms than do fully modular (or market) forms. While modularity theory identifies this continuum, the associated empirical literature tends to dichotomize modularity: firms are either modular or they are not. Nor does the empirical literature examine the performance outcomes of modular arrangements within this continuum. By examining firms that vary between full integration and partial modularity with a continuous modularity measure, this paper empirically examines the performance outcomes associated with a range of modularity levels. We derive this measure from a peculiar inventory option available within the electronic manufacturing services (EMS) industry. Our data include observations on 260 firms over five years. We find that more firms rely on partially modular arrangements, the lower their performance. We suggest explanations for this result, and areas of future research meant to pursue it.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/13662710903371074
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    Article provided by Taylor & Francis Journals in its journal Industry and Innovation.

    Volume (Year): 16 (2009)
    Issue (Month): 6 ()
    Pages: 575-592

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    Handle: RePEc:taf:indinn:v:16:y:2009:i:6:p:575-592
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    1. Dieter Ernst, 2005. "Limits to Modularity: Reflections on Recent Developments in Chip Design," Industry and Innovation, Taylor & Francis Journals, vol. 12(3), pages 303-335.
    2. 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.
    3. Fleming, Lee & Sorenson, Olav, 2001. "Technology as a complex adaptive system: evidence from patent data," Research Policy, Elsevier, vol. 30(7), pages 1019-1039, August.
    4. Hoetker, Glenn, 2002. "Do Modular Products Lead to Modular Organizations?," Working Papers 02-0130, University of Illinois at Urbana-Champaign, College of Business.
    5. 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, June.
    6. Vincent Frigant & Damien Talbot, 2005. "Technological Determinism and Modularity: Lessons from a Comparison between Aircraft and Auto Industries in Europe," Industry and Innovation, Taylor & Francis Journals, vol. 12(3), pages 337-355.
    7. Timothy J. Sturgeon, 2002. "Modular production networks: a new American model of industrial organization," Industrial and Corporate Change, Oxford University Press, vol. 11(3), pages 451-496, June.
    8. Peter Galvin & Andre Morkel, 2001. "Modularity On Industry Structure: The Case Of The World The Effect Of Product Bicycle Industry," Industry and Innovation, Taylor & Francis Journals, vol. 8(1), pages 31-47.
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