Do modular products lead to modular organizations?

Authors

  • Glenn Hoetker

    Corresponding author
    1. College of Commerce and Business Administration, University of Illinois at Urbana-Champaign, Champaign, Illinois, U.S.A.
    • College of Business, University of Illinois at Urbana-Champaign, 350 Wohlers Hall, 1206 South Sixth Street, Champaign, IL 61820-6980, U.S.A.
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Abstract

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 multifaceted 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 underappreciated costs of designing and maintaining a modular organization. Copyright © 2006 John Wiley & Sons, Ltd.

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