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Do Modular Products Lead to Modular Organizations?

  • Hoetker, Glenn

    (U of Illinois at Urbana-Champaign)

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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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
Contact details of provider: Web page: http://www.business.uiuc.edu/Working_Papers/Main.asp
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  8. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-61, October.
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  11. 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.
  12. Kenneth E. Train, 1998. "Recreation Demand Models with Taste Differences over People," Land Economics, University of Wisconsin Press, vol. 74(2), pages 230-239.
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