The Power of Integrality: Linkages between Product Architecture, Innovation, and Industry Structure

Fixson, Sebastian K.; Park, Jin‐Kyu

doi:10.2139/ssrn.976075

Cited by 33 publications

(49 citation statements)

References 65 publications

(16 reference statements)

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“…It is well known that firms' decisions to integrate or specialize, when widely adopted, lead to vertically integrated or horizontally layered industry structures (see, for example, Baldwin and Clark, 2000;Jacobides, 2005;and Fixson and Park, 2008). However, studies at the firm level, starting with Harrigan (1985), have shown that the boundary and scope decisions of firms are often more complex than simply to integrate or specialize.…”

Section: Discussionmentioning

confidence: 99%

“…A number of studies at the sector level have explored how the internal boundaries of industries change and how intermediate markets emerge or disappear (Baldwin and Clark, 2000;Jacobides, 2005;Fixson and Park, 2008). Drawing on the engineering and product design literatures, defined "industry architecture" as a somewhat stable but evolving set of relationships that organize production and innovation processes in a sector.…”

Section: Sector-level Studiesmentioning

confidence: 99%

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The architecture of transaction networks: a comparative analysis of hierarchy in two sectors

Luo

Baldwin

Whitney

et al. 2012

Industrial and Corporate Change

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Many products are manufactured in networks of firms linked by transactions, but comparatively little is known about how or why such transaction networks differ. This paper investigates the transaction networks of two large sectors in Japan at a single point in time. In characterizing these networks, our primary measure is "hierarchy," defined as the degree to which transactions flow in one direction, from "upstream" to "downstream." Our empirical results show that the electronics sector exhibits a much lower degree of hierarchy than the automotive sector because of the presence of numerous inter-firm transaction cycles. These cycles, in turn, reveal that a significant group of firms have two-way "vertically permeable boundaries": (1) they participate in multiple stages of an industry's value chain, hence are vertically integrated, but also (2) they allow both downstream units to purchase intermediate inputs from and upstream units to sell intermediate goods to other sector firms. We demonstrate that the 10 largest electronics firms had two-way vertically permeable boundaries while almost no firms in the automotive sector had adopted that practice.

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Section: Discussionmentioning

confidence: 99%

Section: Sector-level Studiesmentioning

confidence: 99%

The architecture of transaction networks: a comparative analysis of hierarchy in two sectors

Luo

Baldwin

Whitney

et al. 2012

Industrial and Corporate Change

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“…We submit that the literature still overvalues the role of product architecture in taking decisions concerning design and engineering task allocation and question the tight link between product architecture and organization architecture. On this point, our work adds to previous literature that has criticized the emphasis on the role of modular product architectures in the decision of outsourcing development tasks (Brusoni, 2005, Fixson andPark, 2008), to the debate of modularity (Baldwin & Clark, 2000), to the literature on managing innovation of complex products (Hobday et al, 2005), and to the innovation management literature more generally.…”

Section: Introductionmentioning

confidence: 77%

Beyond Product Architecture: Division of Labour and Competence Accumulation in Complex Product Development

Becker

Zirpoli

2011

SSRN Journal

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This paper considers the trade-off between leveraging external sources of innovation by outsourcing design and engineering activities and the ability to develop internal product development competences. The trade-off arises because the division of labor within and across firms' boundaries has a crucial role in shaping competence development processes, especially because the division of labor also influences opportunities for learning by doing. In new product development projects, learning by doing appears to be both a key determinant of competence development and a difficult-to-substitute form of learning. While the division of development tasks is often considered as guided by product architecture, we show that by decoupling the decisions concerning the product architecture and the allocation of development tasks, firms can realize the benefits of outsourcing such tasks while developing new internal competences. Drawing on a longitudinal case study in the automotive industry, we also identify a new organizational lever for shaping competence development paths and for designing firm boundaries. This lever consists in alternating different task allocation schemes over time for different types of development projects. We show why this is a novel solution, what its underlying logic is, and how it enables alleviating the trade-off between the benefits of leveraging external sources of innovation and the opportunities for competence development provided by in-house design and engineering. We discuss implications for theories of organizational boundary design and innovation management.

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“…When the technical architecture entails high levels of reciprocal task interdependency, vertically integrated firms become dominant players (Chandler, 1977;6 Abernathy and Utterback, 1978;Fine, 1998;Fixson and Park, 2008). Conversely, as the technical architecture is broken apart into separate modules, firms become more specialized and the industry takes the form of a cluster or ecosystem (Langlois and Robertson, 1992;Sanchez and Mahony, 1996;Fine, 1998;Baldwin and Clark, 2000;Jacobides, 2005;Iansiti and Levien, 2004).…”

mentioning

confidence: 99%

Bottlenecks, Modules and Dynamic Architectural Capabilities

Baldwin¹

2014

SSRN Journal

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How do firms create and capture value in large technical systems? In this paper, Iargue that the points of both value creation and value capture are the system's bottlenecks.Bottlenecks arise first as important technical problems to be solved. Once the problem is solved, the solution in combination with organizational boundaries and property rights can be used to capture a stream of rents. The tools a firm can use to manage bottlenecks are, first, an understanding of the technical architecture of the system; and, second, an understanding of the industry architecture in which the technical system is embedded.Although these tools involve disparate bodies of knowledge, they must be used in tandem to achieve maximum effect. Dynamic architectural capabilities provide managers with the ability to see a complex technical system in an abstract way and change the system's structure to manage bottlenecks and modules in conjunction with the firm's organizational boundaries and property rights.

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The Power of Integrality: Linkages between Product Architecture, Innovation, and Industry Structure

Cited by 33 publications

References 65 publications

The architecture of transaction networks: a comparative analysis of hierarchy in two sectors

The architecture of transaction networks: a comparative analysis of hierarchy in two sectors

Beyond Product Architecture: Division of Labour and Competence Accumulation in Complex Product Development

Bottlenecks, Modules and Dynamic Architectural Capabilities

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